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Investment Bankers Tackle the Intersection of Technology and Services

Tech-enabled services yield heaps of new deals and opportunities in remote learning, legal e-discovery offerings, data, analytics and other areas.

Investment Bankers Tackle the Intersection of Technology and Services

During ACG’s year-end surveys and the “2022 Guide to Dealmaking” published in January, sources and members predicted that technology and business services would continue to be attractive areas for investment this year.

For some investors, the intersection of these two areas has led to a flood of activity, and experts in the field say the space is poised for continued growth. When covering these areas, investment banks have to get creative about how they approach the sector (or sectors), considering the specialty usually encompasses several industry verticals.


This story originally appeared in Middle Market DealMaker’s Spring 2022 issue. Read the full story in the archive.


At William Blair, the group that covers the space is called Tech-Enabled Services. It was renamed from Business Services at the end of 2020. The group follows human capital management, legal technology, education and training, insurance technology and business process out-sourcing (BPO) companies. The TES group is primarily focused on services businesses that use technology as a competitive differentiator, according to Britt Trukenbrod, a managing director and the head of TES.

“Our pipeline is incredibly strong with private equity firms looking to deploy capital aggressively,” says Trukenbrod, adding that in many cases hold times for these businesses are getting shorter and sale processes are moving along quicker than usual.

Remote Higher Education

In the education and training area, William Blair has overseen multiple deals in the workforce development and professional upscaling arena. “COVID and work-from-home culture led to an evolution in how content is delivered and consumed,” Trukenbrod says. “COVID greatly accelerated digitization trends in the market,” he adds.

Many people are pursuing higher-education degrees from home, studying online to pursue a new career track, or beefing up their skills and certifications to advance within their current field. William Blair’s work in upskilling included advising Carrus on its combination with Penn Foster under sponsor Revelstoke Capital Partners. Carrus delivers continuing education and certification services to the healthcare industry.

Related content: Tech-Enabled Coaching Is Fueling Investment in Professional Development in Higher Education

William Blair also advised Osmosis.org in its acquisition by Elsevier, and StraighterLine in its buyout by BV Investment Partners. Osmosis offers easy-to-use learning modules to clinicians and caregivers in the healthcare space. StaighterLine offers online courses that can be used toward credits and college degrees at specific universities.

Most of these programs are geared toward working adults who often have families, making it impractical for them to move in order to attend a traditional in-person college or university, Trukenbrod explains.

Legal Services

In the legal sector, the industry is becoming more professionalized as complexity is increasing, according to Trukenbrod. Companies and law firms are increasingly using outsourced legal services and technologies as a core part of their strategies. “It helps attorneys manage the mountains of documents that have resulted from our highly digital work environment,” Trukenbrod says. As regulation, legislation and competition increase, it presents significant opportunities in the legal subsector, he adds.

William Blair’s engagements in this space include Noble Law’s sale to Alpine, EagleTree Capital’s acquisition of Integreon, and Xact Data Discovery’s sale to Aquiline Capital Partners.

Valuation multiples for many of the transactions in tech-enabled services are in the mid-to-high-teens range, according to industry publications. “In 2021, we saw many tech-enabled services businesses trade at record multiples,” Trukenbrod says.

Related content: Overcoming Resource Limits to Bring the CCO to the Table

Data and Analytics

At Raymond James, the focus of the Technology & Services Group includes financial technology, data and information services, marketing services and software applications, among other areas. “The data and information services sector has been one of the most active areas across our technology coverage universe,” says Ian O’Neal, a managing director who focuses on the specialty within the Tech & Services team at Raymond James.

“The proliferation and availability of data across all domains and verticals has been incredible,” O’Neal says. Moreover, companies are finding unique and sophisticated ways of harnessing data and information (e.g., through artificial intelligence or machine learning) to capture insights and intelligence, drive mission-critical function, and streamline daily workflows.

While many companies have become effective at capturing their own first-party data, the most interesting information services providers add intelligence and provide tools that integrate this intelligence into daily operations. “You need a provider who can capture data from disparate sources, harness and unlock intelligence, and provide context that drives decisions,” O’Neal explains. “Data is great, but without intelligence or tools to put that data to work, it doesn’t create much value.”

Raymond James’ work in data and analytics included the sale of Discovery Data to Institutional Shareholder Services, Francisco Partners’ investment in SourceScrub, and Moody’s acquisition of Cortera. Discovery Data offers data and analytics to registered investment advisors and broker dealers, while SourceScrub offers intelligence on private companies. Cortera offers credit data and analysis on more than 36 million companies.

Data is great, but without intelligence or tools to put that data to work, it doesn’t create much value.

Ian O’Neal

Managing Director, Raymond James

It is not uncommon for businesses in the space to trade for double-digit revenue multiples and greater than 30x EBITDA, O’Neal says. Leaders in the sector often have high gross margins and can scale quickly.

For private equity firms, part of the draw is the ability to create platforms that generate stable, predictable cash flows and pursue add-on acquisitions. “A platform can acquire a ‘tuck-in’ acquisition that may be only a few million of revenue, but nearly all of that can drop to the bottom line given the operating leverage exhibited by strong data and information platforms,” O’Neal says. In addition, financial buyers can afford to pay more for platform acquisitions, knowing that large market leaders are highly coveted and trade for high multiples in exits.

Part of the challenge when doing diligence on these businesses is explaining the depth of the competitive moats to investors. “It’s not just accessing the data—which can often be publicly available—it’s extracting intelligence and developing the tools and insights derived from these sources that industries rely on to function,” O’Neal says.

“We’ll continue to see robust activity in the space. There has been an explosion in the quantity of data available, and initiatives around artificial intelligence, machine learning and other transformative technologies that are rapidly impacting society are all underpinned by high-quality data and information,” O’Neal says. “It all starts with raw data or a source of truth—that’s what makes the future of this industry so exciting.”