AI &amp; Analytics Service Companies Sees 4–5% Increase in M&amp;A
AI and analytics always have something interesting brewing—be it mergers and acquisitions, fundraising or strategic partnerships. One way to look at this is that larger traditional players are acquiring small to midsize companies and expanding their service offerings, alongside tapping into the talent pool of the organisation. “There has been at least 4–5% increase in the kind of mergers and acquisitions that have happened across AI and analytics service companies,” said UnearthInsights’ founder Gaurav Vasu, in an interaction with Analytics India Magazine. List of Acquisitions Earlier this week, global business process outsourcing firm WNS acquired The Smart Cube, an analytics service startup to strengthen procurement and logistics capabilities. In September 2022, Global IT firm Altair acquired Rapidminer, a leader in advanced data analytics and ML software, to strengthen its end-to-end data analytics (DA) portfolio. Earlier this year, HCL Technologies acquired Budapest-based Starschema, a global data services consultancy, to bolster HCL’s capability in digital engineering and expand its footprint in Central and Eastern Europe. The IT giant will also leverage the specialised talent offered by Starschema. Last year, EXL, the global analytics and digital solutions leader, acquired the data analytics service provider, Clairvoyant to expand EXL’s offerings and to help clients drive large-scale digital transformation projects. In the same year, IT service company Accenture acquired Bridgei2i, an AI and analytics firm, again to expand its capabilities in data science, machine learning and AI-powered insights. The acquisition also added 800 skilled professionals to Accenture’s Applied Intelligence practice. In January 2021, the global professional service company Genpact acquired Enquero, a data engineering and analytics firm. The acquisition was intended to use Enquero’s talent and resources and extend its capabilities, increasing the scale and depth of Genpact’s data and analytics teams to deliver the end-to-end transformation of enterprise clients. Enquero’s CEO believed the acquisition was the next “logical step” for them. The list goes on and on. Additionally, the advanced data analytics company LatentView also said recently that they would continue focusing on inorganic growth and M&A since 10–15% of the revenue comes from its analytics consulting business. A general theme among the acquisitions is that large business groups are acquiring small and mid-size companies to expand their offerings and take advantage of the existing talent in these organisations. Startups Raising Funds Adding to the list of acquisitions are also companies that have raised capital from investors: For instance, the data engineering and AI solutions provider Sigmoid raised $12 million in the latest funding round from Sequoia Capital. The funding was targeted towards catering to the demand for solutions to assist enterprises in using AI/ML capabilities, whose market is expanding year-over-year. Similarly, this month, QuantCube Technology announced Series B funding led by the Strategic Development Fund (SDF) to harness the potential of AI and big data analytics to support growth in economic nowcasting. Tredence, the Data Science and AI solutions company, raised $175 million in Series B funding from Advent International to accelerate AI and data-driven development for industries. An AIM report published in January 2022 shows that the numbers reflect the demand, with startup funding increasing to $1,108 million (by 32.5% on a YoY basis) in 2021 compared to $836.3 million in 2020. The reigning trend The acquisitions, according to Vasu, can be categorised into three broad trends. Firstly, the acquisitions allow consolidation of capabilities since many data analytics servicing startups have something niche to offer. So, many of the acquisitions above don’t necessarily mean that the companies don’t have an analytics division but rather capability expansion is a gap that large organisations are increasingly filling. Additionally, the startups that are trying to assimilate are also doing so for scale. The second notable trend Vasu points out is that many commoditised service players like dashboard creation, descriptive analytics service, or descriptive analytics platforms are getting consolidated because of fears of slowdown and recession. The commoditised services are generally hard for small startups to generate revenue from and therefore become an avenue for investors to exit. Finally, the above-listed acquisition cases also suggest that procuring talent from startups becomes an important asset for organisations. Therefore, the third trend is acqui-hiring. Hence, a lot of small analytics players will get acqui-hired in the slowdown period since they will find it difficult to sell their services. He further adds that, “For FY 24–25, we will continue to see this trend—a lot more Indian global analytics firms getting acquired to build capabilities”. Therefore, the string of acquisitions is a move for IT and business solutions providers to be larger and larger in their expertise and potentially be a monopoly by catering to the data-driven development needs of enterprises across industries. It also allows small and mid-size startups to scale across multiple industries on the shoulders of these large organisations—therefore, logically a good exit measure for startups to enable scale and growth.
The acquisitions will expand their offerings and give access to the large talent pool of analytics service startups.
“There has been at least 4–5 percent increase in the kind of mergers and acquisitions that have happened across AI and analytics service companies,” said UnearthInsights’ founder Gaurav Vasu, in an interaction with Analytics India Magazine.
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Ayush is interested in knowing how technology shapes and defines our culture, and our understanding of the world. He believes in exploring reality at the intersections of technology and art, science, and politics.