Dear Tech Enthusiast,

Welcome to the latest edition of the Stay Ahead in IT newsletter. As we navigate through the second half of the year, the landscape of cybersecurity and IT services continues to evolve rapidly. In this issue, we delve into the psychological impacts of cybersecurity threats, highlight recent key M&A activities, and provide expert insights to help you navigate these dynamic times.

Highlights from This Issue:

  • Cybersecurity Stress on IT Teams: The Schwarz Gruppe’s Cyber Security Report 2024 sheds light on the mental health challenges faced by IT leaders and security teams in the face of escalating cyber threats. This section offers actionable advice for both entrepreneurs and investors to support their teams and strengthen their cybersecurity frameworks.

  • Key M&A Movements: The IT services sector has seen significant M&A activity since our last newsletter in May. Explore the latest deals that are driving growth and strategic expansion, from dacoso’s partnership with Waterland to Devoteam’s acquisition of Ubertas Consulting. These transactions highlight the industry’s dynamic nature and provide insights into future trends.

  • AI in Digital Value Creation: We sit down with Alexander Loth, Senior Advisor at IT Capital Partners, to discuss the transformative role of AI in business. Discover how AI is enabling digital transformation, driving innovation, and creating new revenue streams across various sectors.

  • Private Equity Trends: Despite the challenges faced by the private equity sector, there are reasons for optimism. The latest McKinsey Global Private Markets Review 2024 highlights key trends and developments, emphasizing the importance of operational efficiency and profitability in driving long-term value.

  • Upcoming Conferences: Stay ahead of the curve by attending key IT and investment conferences in 2024. Events like ContainerDays Conference in Hamburg, B2B Rocks in Paris, and The Things Conference in Amsterdam offer invaluable opportunities for networking and gaining insights from industry leaders.

Cybersecurity: The Psychological Toll on IT Leaders and Security Teams

As cyber threats become increasingly sophisticated and pervasive, the pressure on IT leaders and security teams has reached unprecedented levels. The latest Cyber Security Report 2024 from Schwarz Gruppe delves into the often-overlooked psychological impacts of cyberattacks on these crucial front-line defenders. This section explores the findings and offers actionable insights for both entrepreneurs and investors.

Our Key Takeaways:

For Entrepreneurs:

  1. Recognize the Human Element: Understand that cybersecurity is not just a technical challenge but a human one. Supporting your IT team’s mental health is crucial for maintaining a robust security posture.

  2. Implement Support Systems: Regularly check in with your cybersecurity teams, provide access to mental health resources, and encourage a healthy work-life balance to prevent burnout.

  3. Invest in Training: Continuous education and skills development can help your team feel more prepared and confident in handling emerging threats.

  4. Promote a Positive Culture: Foster a work environment that values open communication, teamwork, and mutual support. A positive workplace culture can alleviate stress and enhance overall team resilience.

  5. Deploy Advanced Tools: Invest in advanced cybersecurity tools and automation to reduce the burden on human resources. Efficient tools can minimize manual work and allow the team to focus on strategic defense measures.

For Investors:

  1. Evaluate Leadership Resilience: When considering investments in IT firms, assess the mental well-being and resilience of their leadership and security teams. A stressed and burnt-out team can jeopardize a company’s security and overall performance.

  2. Support Organizational Health: Encourage the implementation of support systems within your portfolio companies. A healthy, well-supported team is more likely to perform effectively and sustain long-term growth.

  3. Focus on Sustainable Practices: Advocate for sustainable cybersecurity practices that prioritize both technological defenses and the well-being of the people managing them.

  4. Assess Cyber Maturity: Look for companies with advanced cyber defense mechanisms and comprehensive incident response plans. Companies with mature cybersecurity practices are better positioned to handle threats efficiently.

  5. Consider the Long-Term Impact: Invest in companies that not only have robust cybersecurity strategies but also focus on the mental health and well-being of their IT staff. This dual focus can lead to sustainable growth and stability.

Recent Key M&A Movements in IT Services: Major Transactions and Strategic Expansions Since Our Last Update

In our last Stay Ahead in IT Newsletter in May, we highlighted some significant deals in the IT service sector. Since then, numerous additional transactions have emerged, showcasing the dynamic growth and strategic acquisitions within the industry. Below, you will find the latest and most important M&A activities that IT entrepreneurs and investors should keep an eye on.

  • July 3, 2024: PRIMEPULSE Sells Stake in glueckkanja to Norvestor
    PRIMEPULSE SE has sold its stake in glueckkanja AG, a leading Cloud Managed Service Provider in the Microsoft ecosystem, to Norvestor IX SCSp. glueckkanja is renowned for its Managed Workplace, Managed Azure, and Managed Security services, along with proprietary SaaS solutions. The transaction aims to enhance glueckkanja’s growth trajectory and international expansion, with the management team, led by CEO & Co-Founder Christian Kanja, remaining in place.

  • June 26, 2024: dacoso and Waterland’s Partnership: dacoso, a leading IT service provider in the DACH region, has partnered with European private equity fund Waterland to advance its international expansion and strengthen its position in networks and cybersecurity. The founders of dacoso will retain a stake, and the transaction aims to enhance dacoso’s growth trajectory.

  • June 25, 2024: EVOK Joins Sequotech Group: EVOK, an established IT service provider, has joined the Sequotech Group to solidify its position as a leading IT service group in Western Switzerland. The integration will enhance Sequotech’s portfolio with EVOK’s expertise in cloud and managed services.

  • June 20, 2024: Bregal Unternehmerkapital Acquires Relatech: Bregal Unternehmerkapital has acquired a majority stake in Relatech, a B2B partner for digital transformation, aiming to delist the company from Euronext Milan Growth. This acquisition will bolster Relatech’s growth in digital engineering, cybersecurity, and industrial automation.

  • June 20, 2024: fernao Group Acquires BNC AG: The fernao Group has strengthened its Swiss platform by acquiring BNC AG, an IT service provider specializing in cybersecurity and digital infrastructure. This move expands fernao’s presence into the French-speaking part of Switzerland.

  • June 11, 2024: Devoteam Expands AWS Expertise with Ubertas Consulting: Devoteam has acquired Ubertas Consulting, a UK-based AWS consultancy, to strengthen its Amazon Cloud services across the UK and Ireland, enhancing its ability to deliver exceptional AWS solutions.

  • June 3, 2024: Dataciders Acquires PRODATO: Dataciders has acquired PRODATO to solidify its leadership in data, analytics, and AI services in the DACH region, expanding its expertise and customer base.

  • May 28, 2024: AOE Group Expands with FInno Consult, ENNOstudio, and ITM Research: The AOE Group has acquired FInno Consult, ENNOstudio, and ITM Research to strengthen its position in digital transformation consulting and development, particularly in the banking and insurance sectors.

  • May 21, 2024: Dataciders Strengthens Supply Chain Management with Redpoint.Teseon Acquisition: Dataciders has acquired Redpoint.Teseon, enhancing its capabilities in supply chain management and expanding its customer base in the pharmaceutical sector.

  • May 13, 2024: ISAP AG Joins MAIT Group: ISAP AG, a specialist in product development digitalization, has joined the MAIT Group, adding 110 experts and 1,500 customers to MAIT’s portfolio and strengthening its position in the DACH region.

  • May 10, 2024: Devoteam Acquires ProCori: Devoteam has acquired ProCori, a Swedish-based ServiceNow consultancy, to bolster its ServiceNow capabilities and expand its presence in the Nordic region.

  • May 8, 2024: engineering methods AG Sells Majority Stake to Patrimonium Private Equity and Wille Finance: engineering methods AG has sold a majority stake to Patrimonium Private Equity and Wille Finance to support its growth strategy in digital transformation for engineering and manufacturing companies.

  • May 5, 2024: Perficient to be Acquired by EQT for Approximately $3.0 Billion: Perficient has entered into a definitive agreement to be acquired by EQT, a global investment organization, enhancing its capabilities in digital transformation consulting.

  • May 3, 2024: Netrics Group Acquires GARAIO AG: Netrics Group has acquired GARAIO AG to strengthen its offerings in digital workplace and cloud solutions, expanding its team and service capabilities in Switzerland.

Interested in IT-Service Investments? Request our Fund Memorandum.

AI in Digital Value Creation: Interview with Alexander Loth, Senior Advisor at IT Capital Partners

IT Capital Partners: Good morning, Alexander. It’s a pleasure to have you with us today. With your extensive experience in AI, how do you see AI contributing to digital transformation and value creation in businesses?

Alexander Loth: Thank you for having me. AI is a pivotal tool in driving digital transformation by automating processes, enhancing decision-making, and creating new services. Our work has demonstrated that businesses leveraging AI see significant improvements in productivity and innovation. This is a key theme in my book, Decisively Digital, where I explore how AI can open new revenue streams and enhance customer experiences.

IT Capital Partners: Given your background in computational nuclear research at CERN and now in AI, could you share how these experiences have shaped your approach to AI strategy in businesses?

Alexander Loth: My time at CERN was instrumental in understanding complex data systems and the power of computational analytics. These skills have been crucial in AI strategy, where we apply similar principles to solve business challenges, optimize performance, and secure competitive advantages in various industries. This unique blend of experiences has enabled me to craft AI strategies that are both technically sound and highly impactful for business transformation.

IT Capital Partners: What are some of the key strategies you’ve implemented to foster innovation and drive value through AI?

Alexander Loth: One key strategy is our collaborative approach to innovation. We partner with academic institutions and other industries to co-develop solutions tailored to specific challenges. This not only speeds up innovation but also ensures that our AI applications are grounded in real-world needs, significantly boosting their impact. Additionally, we emphasize the importance of ethical AI practices, ensuring that our innovations are not only effective but also responsible and trustworthy.

IT Capital Partners: Can you discuss a particular case where AI significantly transformed a company or industry?

Alexander Loth: Certainly. In the healthcare sector, we developed an AI model that predicts patient outcomes by analyzing patterns in historical data. This tool has helped hospitals improve treatment strategies, reduce operational costs, and most importantly, save lives. It’s a prime example of how AI can transform industries by making them more efficient and impactful. This project is also detailed in my book, Decisively Digital, which explores various strategies for leveraging data and AI in different industries.

IT Capital Partners: How do you see AI evolving in the next few years, especially in terms of helping companies during their digital transformation journeys?

Alexander Loth: AI is becoming increasingly sophisticated, with advancements in natural language processing and machine learning opening up new avenues for innovation. Companies that integrate AI into their core strategies will find themselves at the forefront of digital transformation. The key is to continuously adapt and innovate, ensuring that AI solutions align with evolving business goals and customer needs. The next few years will see AI not just as a tool, but as a foundational element of business strategy.

IT Capital Partners: Finally, what advice would you give to companies looking to leverage AI for digital transformation and value creation?

Alexander Loth: Start with a clear vision of what you want to achieve with AI. It’s crucial to have strategic objectives that guide your AI initiatives. Then, invest in the right talent and technologies to build robust AI capabilities. Finally, foster a culture of innovation where AI-driven solutions are continuously developed and optimized. It’s also important to stay informed about the latest advancements and best practices in AI, as this field is rapidly evolving.

IT Capital Partners: Thank you, Alexander, for sharing your insights and experiences with us today.

Alexander Loth: It’s been a pleasure. Thank you for the opportunity to discuss how AI can drive significant transformation and value in today’s digital landscape.

Private Equity: Resilient Through the Crisis?

In a year full of challenges for the private equity sector, there is still reason for optimism. The latest McKinsey Global Private Markets Review 2024 highlights impressive developments and trends. The McKinsey report highlights that leverage and market multiple expansion drove 67% of returns for buyout deals from 2010 to 2021, as illustrated in the graphic below. This emphasizes the importance of focusing on revenue growth and margin expansion in the current environment. Further key insights from the study are ...

Key Insights:

  • Fundraising Challenges: Fundraising in 2023 decreased globally by 15% to $649 billion, the lowest level since 2017. Interestingly, buyout strategies had their best year ever, raising a record $424 billion, while growth equity and VC experienced significant declines.

  • Asset Management and Performance: Despite the drop in fundraising, private equity assets under management (AUM) increased by 8% to $8.2 trillion. This growth was driven more by continued fundraising than by performance. Buyouts achieved a modest net IRR of 4.9%, while VC investments posted losses for the second consecutive year.

  • Deal Activity and Strategies: Deal volume and count fell by 21% and 24%, respectively. However, 46% of the total buyout deal volume was achieved through add-on deals, setting a new record.

  • Future Outlook: The challenges of the past year, including higher financing costs and valuation fluctuations, have shown that adaptation and innovation are key to success. PE managers are increasingly focusing on operational efficiency and profitability to boost performance and create long-term value.

  • Long-Term Perspective: Long-term returns in the private equity sector remain robust. The median net IRR for PE funds launched between 2011 and 2020 was 16.4%, which surpasses even the top-quartile returns of other private asset classes.

Upcoming IT and Investment Conferences:

  • ContainerDays Conference: September, 3-4, Hamburg, Germany -
    An annual event for Kubernetes, cloud-native, and container enthusiasts featuring technical talks, networking, and live discussions on current trends.

  • B2B Rocks: September 25-26, Paris, France - Focused on B2B and SaaS startups, B2B Rocks at Station F limits attendance to 800 to enhance discussion quality and networking opportunities, with a program centered on actionable insights.

  • The Things Conference: September 25-26, Amsterdam, Netherlands -
    Dedicated to LoRaWAN use cases in IoT, this event offers hands-on experiences, networking opportunities, and workshops to build smart applications.

  • Baader Investment Conference: September 23-26, Munich, Germany - Hosted by Baader Bank Group, this conference offers a unique opportunity to meet listed companies and institutional investors. Last year, over 700 investors from 30 countries participated, with around 3,000 individual and group presentations.

  • Cyber Security & Cloud Expo Europe: October 1-2, Amsterdam, Netherlands - A conference featuring Cloud Infrastructure tracks and networking with leading tech companies.

  • SaaStock: October 14-16, Dublin, Ireland - Known as the Disneyland for SaaS companies, SaaStock features extensive networking opportunities and learning experiences for SaaS founders and executives to explore new trends and practices.

  • Web Summit: November 11-14, Lisbon, Portugal - Web Summit in Lisbon is one of the largest technology conferences globally, attracting over 70,000 participants to discuss how technology influences society and business across various sectors.

  • SaaS Monster (Web Summit): November 11-14, Lisbon, Portugal - Running concurrently with Web Summit, SaaS Monster focuses on enterprise technology, offering insights into SaaS, Cloud Computing, and Big Data with access to global industry leaders and experts.

  • Gartner IT Infrastructure, Operations & Cloud Strategies Conference: November 19-20, London, UK - This Gartner conference focuses on the future of IT infrastructure and operations, covering topics from cloud computing to cybersecurity, essential for leaders in the digital transformation space.

  • Big Data Conference Europe: November 19-22, Vilnius, Lithuania - Focuses on Big Data, High Load, Data Science, Machine Learning, and AI through workshops and sessions. 

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