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Stay Updated: This Week’s Top News Stories Inside

August 31, 2025

Stay updated with our weekly round up of funding and M&A news, bringing you the latest from the startup ecosystem.

Startup Funding Summary

TransBnk

Mumbai-based fintech platform, has raised $25 Mn in Series B funding from Bessemer Venture Partners, Arkam Ventures, Fundamentum Partnership, 8i Ventures, Accion Venture Labs and GMO Venture Partners

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Kiwi

Bengaluru-based fintech startup, has raised $24 Mn in Series B funding from Vertex Ventures Southeast Asia & India, Nexus Venture Partners, Stellaris Venture Partners and Omidyar Network

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Altum Credo

Pune-based NBFC, has raised $20 Mn in funding from British International Investment

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CredRight

Hyderabad-based NBFC, has raised $10 Mn in Series B funding from Abler Nordic, Michael & Susan Dell Foundation and Unleash Capital

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WizCommerce

Bengaluru-based AI-powered ecommerce platform, has raised $8 Mn in Series A funding from Peak XV Partners, Blume Ventures, Z47 and Alpha Wave

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M&A Snippets

New Delhi-based pharmaceutical firm Panacea Biotec will acquire New Delhi-based health & wellness brand Power Gummies for an undisclosed amount

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How AI is Transforming BPOs in 2025

August 27, 2025

The Business Process Outsourcing (BPO) industry has long been an enabler of cost efficiency for enterprises by relocating back-office operations to low-cost geographies. Traditionally, the model revolved around scale of human labor—large teams of agents working under seat-based or FTE (full-time equivalent) pricing models.

Fast forward to 2025, and the industry is undergoing its most significant transformation in decades. Artificial intelligence (AI), intelligent automation, and predictive analytics have shifted the conversation from cost arbitrage to value creation. BPOs are no longer just outsourcing partners—they are evolving into strategic business accelerators, helping enterprises achieve scalability, innovation, and measurable outcomes at speed.

The End of Legacy Models

  • From FTE to Outcome-Based Pricing: Clients are increasingly unwilling to pay for “hours logged.” Instead, they demand outcome-driven contracts, where service providers are compensated based on results—reduced processing time, improved customer satisfaction scores, or compliance accuracy.
  • Decline of Pure Labor Arbitrage: With automation managing repetitive and rule-based tasks, the advantage of relocating work to low-cost locations is shrinking. Instead, differentiation comes from technology adoption, domain expertise, and analytics-driven insights.

AI as the Growth Engine

Smarter, Faster, and Scalable Operations

  • Robotic Process Automation (RPA) and Intelligent Process Automation (IPA):
    Large-scale invoice processing, claims validation, KYC verification, and payroll management are now fully automated with minimal human intervention. Some global BPOs report over 70% cost savings in finance back-office functions using IPA.
  • Natural Language Processing (NLP) and Conversational AI:
    Advanced virtual assistants powered by generative AI manage 80–90% of customer service queries. Unlike first-gen chatbots, they understand context, detect sentiment, and escalate only the most complex queries to humans.
  • Generative AI in Knowledge Work:
    Beyond routine processes, generative AI is transforming areas like financial reporting, regulatory compliance, and contract summarization. CFOs now receive automated, real-time dashboards from outsourced finance partners, enabling better strategic decision-making.
  • Predictive Analytics and Proactive Service:
    AI helps detect fraud, forecast demand surges, and predict customer churn before it happens. For instance, in telecom BPOs, predictive AI helps reduce churn rates by up to 20% by identifying at-risk customers and offering proactive retention solutions.
  • Scalability without Headcount Changes:
    Seasonal spikes (e.g., holiday shopping in retail or tax season in finance) are easily managed by scaling virtual agents instead of recruiting and training thousands of temporary staff.

Real-World Case Studies

  • Financial Services
    A global bank partnered with a leading BPO provider to automate loan processing. Using AI-driven document recognition and validation, the turnaround time reduced from 3 days to 30 minutes, while compliance errors fell by over 95%.
  • Healthcare
    A healthcare BPO deployed AI to automate medical coding and claims processing. Result: claims denial rates dropped by 22%, and revenue cycle management became more efficient, enabling providers to focus more on patient care.
  • E-commerce & Retail
    An e-commerce giant outsourced customer support to an AI-first BPO. During peak holiday season, the BPO scaled from 1,500 to 15,000 concurrent AI-driven chat sessions, maintaining a CSAT score of 92% without proportional hiring costs.
  • Insurance
    An insurer adopted predictive AI for claims fraud detection. Their BPO partner integrated machine learning models, flagging anomalies in claims data. This reduced fraudulent payouts by $20 million annually while accelerating legitimate claims processing.

Strategic Partnerships and Consolidation

  • Tech + BPO Synergy:
    Consulting giants like Accenture, Deloitte, and Infosys BPM are acquiring or partnering with automation-first BPO firms. The goal: to integrate domain expertise with AI-driven solutions, creating end-to-end transformation partners rather than just outsourcing vendors.
  • Private Equity Play:
    PE firms are aggressively investing in mid-sized BPOs and merging them with AI startups. The result: hybrid organizations that deliver technology-driven scale and domain-specific expertise. For example, several roll-up deals in 2024–2025 have combined AI workflow automation firms with traditional healthcare BPOs, creating market leaders in patient data and claims automation.

Benefits for Businesses

  • Cost Efficiency – AI-enabled BPOs can deliver 50–70% savings by cutting down repetitive work.
  • Accuracy and Compliance – Virtually error-free processes, particularly in regulatory-heavy industries like BFSI and healthcare.
  • Customer Experience (CX) – AI-driven support provides 24/7, multilingual, omnichannel assistance, raising service benchmarks.
  • Agility & Innovation – Businesses can reallocate savings toward R&D, digital transformation, and customer-facing innovation.

The Challenges and Human Element

Despite rapid automation, human talent remains critical:

  • Complex problem-solving: Disputes, negotiations, and exceptions require human judgment.
  • Creativity & Consulting: AI cannot fully replicate strategy, creative campaigns, or advisory services.
  • Trust & Empathy: Especially in healthcare, insurance, and sensitive customer scenarios, empathy-driven communication remains essential.

The future is a hybrid model, where AI handles scale and speed, and humans provide empathy, critical thinking, and innovation.

Industry Focus & Key Players in 2025

  • Banking & Financial Services (BFSI): Rapid adoption of RPA and compliance automation (Infosys BPM, Genpact).
  • Healthcare: AI-driven claims processing, patient data management (Optum, Cognizant).
  • Retail & E-commerce: Conversational AI for customer support (Teleperformance, TTEC).
  • Telecom: Predictive analytics for churn management (Wipro, Tech Mahindra).
  • Insurance: AI fraud detection, claims management (EXL Service, Accenture).

Emerging Players: Mid-size firms like TaskUs, Firstsource, and Concentrix are positioning themselves as AI-first BPOs, often outpacing larger incumbents in agility.

Evolution of AI-First BPOs

Companies that embraced AI early (2018–2022) have now evolved into end-to-end transformation partners:

  • Shift in Talent Mix: Instead of hiring agents at scale, they now hire data scientists, automation architects, and CX designers.
  • New Revenue Models: Moving away from “per FTE” to shared savings and performance-linked contracts.
  • Geographic Shifts: While India and the Philippines remain dominant, AI allows more nearshoring and onshoring, as cost arbitrage becomes less relevant.
  • Co-creation with Clients: Many AI-driven BPOs now act as innovation partners, co-developing new processes and platforms with their clients.

Conclusion: The New Standard of Outsourcing

The BPO industry of 2025 is not defined by headcount—it is defined by intelligence, scalability, and outcomes. The fusion of AI with traditional outsourcing expertise has reimagined the sector as a strategic growth partner for enterprises worldwide.

The winners in this new era will be:

  • BPOs that balance automation with human expertise.
  • Clients that embrace outcome-driven contracts over legacy pricing models.
  • Investors who back hybrid models blending AI startups with domain-rich service providers.

In short, AI is no longer an add-on in BPO—it is the operating system. Companies that embrace this evolution will not only reduce costs but also unlock innovation, agility, and competitive advantage in an increasingly digital-first world.

 

Sources: Andressen Horowitz, Staple, Technative, Washington Post

Stay Updated: This Week’s Top News Stories Inside

August 24, 2025

Stay updated with our weekly round up of funding and M&A news, bringing you the latest from the startup ecosystem.

Startup Funding Summary

Weaver Services

Mumbai-based fintech startup, has raised $170 Mn in funding from Lightspeed, Premji Invest and Gaja Capital

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R for Rabbit

Ahmedabad-based D2C brand, has raised $27 Mn in Series B funding from Filter Capital, 3one4 Capital and Xponentia Capital

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Beyond Appliances

Bengaluru-based smart kitchen appliances startup, has raised $4 Mn in Series A funding from Fireside Ventures and Dharana Capital

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House of Biryan

Mumbai-based foodtech startup, has raised $4 Mn in funding from Bestvantage Investments, M.S. Dhoni, Mohit Goyal, Abhineet Singh and other HNIs

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Mitra

Delhi-based FMCG startup, has raised $2 Mn in funding from Bestvantage Investments and other HNIs

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M&A Snippets

Noida-based fintech platform Credgenics has acquired a Mumbai-based BPO services startup Arrise for an undisclosed amount

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Stay Updated: This Week’s Top News Stories Inside

August 17, 2025

Stay updated with our weekly round up of funding and M&A news, bringing you the latest from the startup ecosystem.

This Week at Ecosystem Ventures

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Key Highlights – Independence Day Celebration 2025🎉

This Independence Day at Ecosystem Ventures was all about colour, flavour, and togetherness. From dressing in saffron, white, and green to sharing a potluck that brought recipes from every corner of India, the day felt like a true celebration of what unites us. We closed with fun tricolour-themed activities, plenty of laughter, and the kind of moments that remind you unity isn’t just a value, it’s our strength. Here’s to freedom, diversity, and moving forward together.

A very Happy 79th Independence Day to everyone from all of us at Ecosystem Ventures! 🎉

Startup Funding Summary

Truemeds

Mumbai-based healthtech startup, has raised $85 Mn in Series C funding from Accel, Peak XV Partners, WestBridge Capital and Info Edge Ventures

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Ultraviolette

Bengaluru-based automotive startup, has raised $21 Mn in funding from TDK Ventures, Zoho Corporation, Lingotto and other HNIs

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Kimirica

Indore-based beauty and self-care brand, has raised $15 Mn in funding from Carnelian Asset Management LLP

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Dashverse

Bengaluru-based AI-powered entertainment platform, has raised $13 Mn in Series A funding from Peak XV Partners, Z47 and Stellaris Venture Partners

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Pronto

Gurugram-based quick service platform, has raised $11 Mn in Series A funding from General Catalyst, Glade Brook Capital and Bain Capital Ventures

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M&A Snippets

Bengaluru-based fintech platform Niyo has acquired a Mumbai-based financial services firm Kanji Forex for an undisclosed amount

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Mumbai-based travel-tech platform StampMyVisa has acquired Mumbai-based travel-tech startup Teleport for an undisclosed amount

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Bengaluru-based B2B marketplace Zetwork has acquired Mumbai-based manufacturing firm KRYFS Power Components for an undisclosed amount

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ESV Times | Monthly Newsletter | August 2025

August 13, 2025

Training the Builders of the AI Age

When we first began investing in startups, we saw AI as a horizon opportunity—something to track, test, and eventually integrate. But today, in the middle of active buy-side and sell-side IT M&A conversations, it’s clear: AI is no longer a “feature” to add. It’s a capability gap to close—urgently.

Every founder we meet—whether scaling a services company or preparing for a strategic exit—asks some version of the same question:
“Where do we even begin with AI?”

We don’t claim to have all the answers. But here’s what we’ve learned, sitting on both sides of the table:

1. AI Readiness Is the New Technical Due Diligence

During M&A diligence, we’re not just scanning for top-line growth or customer logos. We’re assessing whether a delivery org has begun retraining itself for the AI economy.

  • Is AI being used to reduce bench time?
  • Are copilots embedded in onboarding, QA, or testing workflows?
  • Has leadership mapped where automation can enable—not just replace—talent?

These aren’t nice-to-haves anymore. They’re fast becoming differentiators in how buyers assign value.

2. Automation Hygiene Beats AI Theatre

We’ve seen firms roll out flashy GPT tools for sales decks—while their backend processes remain manual and bloated. That disconnect shows. The companies that stand out don’t over-brand their AI initiatives—they quietly build automation into sprint reviews, delivery playbooks, and onboarding flows.

This is where long-term value compounds: in clean, measurable, boring operations.

3. The Best Companies Retrain Early—Before the Stakes Are High

There’s a misconception we see often: “We’ll invest in AI ops once we cross the next revenue milestone.”

But waiting until you’re preparing for a transaction is too late. By then, AI-readiness isn’t a lever—it’s a liability. The firms that command stronger outcomes are the ones that treat AI like an internal capability, not an afterthought.\

Where We Stand

At Ecosystem Ventures, we’re helping our partner companies—both startups and IT services firms—ask the uncomfortable but necessary questions:

  • Where are we behind on AI adoption within delivery?
  • What workflows need retraining, not just reskilling?
  • How can we tie automation to real operating metrics—Not just for decks?

Whether we’re investing or acquiring, we see our role as co-builders of capability. And that means pushing for AI maturity before it’s fashionable—or fundable.

Changes in P/E Ratios in the Nifty IT Index Over the Last Decade

August 11, 2025

Introduction: Nifty IT Index—Structure, Purpose, and Constitution

The Nifty IT Index is a sector-specific benchmark on the National Stock Exchange (NSE) that tracks the performance of India’s leading IT companies. Its primary purpose is to serve as a barometer for the Indian information technology sector, helping investors and analysts gauge industry health and make informed strategic decisions. The index includes companies engaged in IT infrastructure, education, and software services.

As Ecosystem Ventures, though our focus has largely been on smaller IT companies (typically <1000 Cr.), we do actively track the larger companies to learn from emerging trends.

How Is the Index Calculated and Maintained?

  • The Nifty IT Index is calculated based on the free-float market capitalization method. This ensures only shares available for trading are considered, making the index a realistic representation of market sentiment.
  • The index is reviewed and rebalanced semi-annually, using data from the prior six months to reflect shifts in liquidity, trading frequency, and sector relevance. Eligible companies must exhibit high turnover, consistent trading activity, and a sustained listing history to be considered.
  • Corporate actions (like stock splits and mergers) are handled via divisor adjustments, ensuring that the index value remains comparable over time.
  • A professional team manages the index, overseen by a three-tier governance structure to ensure integrity and transparency.

Current Constituent Companies (2025):

The index comprises 10 companies, typically the biggest and most liquid IT stocks in India. As of August 2025, the constituents are Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro, LTIMindtree, Tech Mahindra, Persistent Systems, Oracle Financial Services Software (OFSS), Coforge, Mphasis

Each company’s weight in the index is based on its free-float market cap, with TCS, Infosys, and HCL Tech collectively dominating the index, reflecting their influence on the industry.

Overview: Why Track the Price-Earnings Ratio (P/E)?

The price-earnings (P/E) ratio is a key valuation metric that expresses what investors are willing to pay per rupee of earnings. In sector indices like Nifty IT, the index-level P/E offers insights into:

  • The market’s growth expectations for the IT sector.
  • Relative valuations versus historical averages and other sectors.
  • Investor sentiment around current and future profitability.

A high P/E typically signals strong earnings growth forecasts and optimism, but can also mean the sector is overheated. Conversely, a low P/E may reflect subdued sentiment or undervaluation due to cyclical downturns.

How Have P/E Ratios of Nifty IT Changed Over the Last Decade?

Historical Trend (2015–2025):

Here’s a heat-map our team created while analyzing how the PE ratio has changed over the last decade.

Key Observations:

  • 2015–2019: The sector traded in a stable P/E range (~17–22), reflecting steady but unspectacular growth as Indian IT matured and global outsourcing demand stabilized.
  • 2020–2022: The sector saw a dramatic surge in P/E, peaking above 35. This can be attributed to the global pivot to digital transformation during the pandemic, as companies rushed to digitize operations, boosting order books and profit outlooks for Indian IT companies. This was also perhaps driven by low interest-rates and sudden surge in liquidity
  • 2023–2025: With the end of pandemic tailwinds and normalizing demand, P/E ratios have moderated to 25–33, reflecting both sustained optimism and some recalibration of growth expectations. It is also notable that there’s a visible decline in PE ratio after the new government in the US.

What Does This Shift in P/E Ratios Indicate?

1. Changing Growth Narrative
The jump in P/E during 2020–22 indicates investors anticipated a step-change in sector profitability. IT companies secured multi-year transformation deals, saw improved pricing power, and benefited from cost optimization. This gold rush, however, also resulted in premium valuations that eventually normalized as growth rates stabilized.

2. Investor Sentiment & Risk Appetite
High sector P/Es signaled robust investor appetite for tech exposure and willingness to pay up for perceived certainty and secular growth. As interest rates and macro risks have evolved (especially in the US and Europe where clients are concentrated), investor focus has shifted more toward sustainable, profitable growth and resilience.

3. Cyclicality and Resilience
The moderation of P/E ratios post-2022 demonstrates typical market behavior: early exuberance for structural winners gives way to more nuanced views as economic cycles reassert and earnings volatility returns. Yet, even at 2025 levels, the P/E remains relatively high, reflecting the enduring strategic importance of Indian IT to global business.

4. Long-Term Outlook

  • The premium assigned to the sector is likely sustainable as long as Indian IT companies continue to win large deals, expand digital and cloud offerings, and deliver on operational efficiency.
  • Any sharp drop in P/E (without an earnings collapse) could signal either a buying opportunity or, conversely, a warning of deeper cyclical headwinds.

Investment and Business Strategy Perspective

For investors and business strategists:

  • Watch P/E Relative to Earnings Growth: The sector’s ability to maintain premium multiples relies on demonstrating both topline (revenue) and bottomline (earnings) growth. Any missed expectations can lead to swift corrections, as seen in the post-pandemic normalization.
  • Diversification Within IT: While TCS and Infosys lead, companies like Persistent Systems and Coforge are nimbler and focus on cutting-edge, high-growth niches (AI, automation, etc.), which may command even higher P/Es during tech upcycles.
  • Macro Sensitivity: With the majority of revenue from US and Europe, the sector is sensitive to currency moves, recessions, and tech budgets abroad—key risks that affect future multiples.

Conclusion

The past decade’s data paints a picture of a sector that’s oscillated between stable growth, exuberant optimism, and rational recalibration—mirroring global digital trends and investor sentiment. As the tech landscape continues to evolve, so too will investor expectations and sectoral P/E ratios.

For smaller tech companies – whether listed, or those looking to list at some point in their journey, it’s critical to have a deep understanding of how the wider / more mature market is evolving, and investor appetite and perception of the overall industry.

Stay Updated: This Week’s Top News Stories Inside

August 10, 2025

Stay updated with our weekly round up of funding and M&A news, bringing you the latest from the startup ecosystem.

Startup Funding Summary

The Sleep Company

Mumbai-based comfort-tech startup, has raised $55 Mn in Series D funding from ChrysCapital and 360 ONE Asset

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Renee Cosmetics

Ahmedabad-based D2C beauty brand, has raised $30 Mn in Series C funding from Playboo, Evolvence India, Edelweiss and Midas Partners

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SuperGaming

Pune-based game development studio, has raised $15 Mn in Series B funding from Skycatcher, Steadview Capital, 16z’s Speedrun, Bandai Namco’s 021 Fund, Polygon Ventures, Neowiz, GFR Fund, IVC Japan, Loud.GG and Sandeep Nailwal

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Zype

Mumbai-based NBFC, has raised $10 Mn in funding from Unleash Capital Partners and Xponentia Capital

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DPDzero

Bengaluru-based fintech startup, has raised $7 Mn in Series A funding from GMO VenturePartners, SMBC Asia Rising Fund, Blume Ventures, India Quotient, Sinarmas Group and others HNIs

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Stay Updated: This Week’s Top News Stories Inside

August 3, 2025

Stay updated with our weekly round up of funding and M&A news, bringing you the latest from the startup ecosystem.

This Week at Ecosystem Ventures

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Key Highlights – ✨Management Marshalls

Our founder, Mr. Abhishek Sanghvi, was invited as a speaker at Management Marshal, delivering an engaging session on “The Bold New World of Startups,” where he shared insights on innovation, soft assets, and building lasting value in today’s evolving startup landscape.

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Key Highlights – INNOVEST 2k25 🚀

Excited to share that our founder, Mr. Abhishek Sanghvi, joined INNOVEST 2025 as an investor! The event, hosted by AIC Prestige, brought together visionary leaders and showcased startups driving purposeful innovation. Kudos to the passionate founders who pitched their ideas with clarity and impact!

Startup Funding Summary

Metaforms

Bengaluru-based AI startup, has raised $9 Mn in Series A funding from Peak XV Partners, Nexus Venture Partners and Together Fund

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STAN

Bengaluru-based gaming platform, has raised $9 Mn in Series A funding from Bandai Namco Entertainment, Square Enix, Reazon Holdings, Google’s AI Futures Fund, Aptos Labs, General Catalyst, GFR Fund, T Accelerate Capital and Pix Capital

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Arivihan

Indore-based edtech startup, has raised $4 Mn in Pre-Series A funding from Prosus Ventures, Accel and GSF Investors

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Sharpsell AI

Mumbai-based AI-driven sales enablement platform, has raised $3 Mn in Series A funding from Equentis Angel Fund, Cornerstone Venture Partners and Mistry Ventures

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Drizz

Bengaluru-based testing automation startup, has raised $3 Mn in Seed funding from Stellaris Venture Partners, Shastra VC, Anuj Rathi and Vaibhav Domkundwar

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M&A Snippets

Bengaluru-based HR tech startup Vahan AI has acquired a Bengaluru-based edtech platform L.earn for an undisclosed amount

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Hyderabad-based SaaS-driven fintech firm Zaggle is to acquire Bengaluru-based fintech startup Rio.Money for $3 Mn

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Inside the Mind of the IT Services Founder: What Drives M&A Decisions on the Buy Side?

August 2, 2025

When you ask the founder of a small IT services company why they decided to acquire another firm, you’re unlikely to hear them talk about EBITDA multiples or valuation models. Instead, you might hear something much more personal:

“We just couldn’t build that capability quickly enough.”

“We liked the team—they shared our mindset.”

“We identified an opportunity in the UK market and didn’t want to wait two years.”

This is the true narrative behind mergers and acquisitions in the small IT services sector. It’s not about spreadsheets; it’s driven by ambition, identifying gaps, and following gut instinct.

1. Building Capabilities They Can’t Build Alone

Most small IT services firms begin with a specific niche, such as cloud migration, DevOps support, or SAP rollouts. However, markets are constantly evolving. AI is changing client expectations, cybersecurity has become essential, and clients increasingly seek a single partner who can manage all their needs.

For founders, acquiring another firm is not merely about growth; it’s about filling a crucial gap in their capabilities. For example, when Mumbai-based Xebia acquired Appcino, a low-code specialist, it was not just a financial decision. This acquisition provided Xebia with expertise in a rapidly growing area that its enterprise clients were demanding. Similarly, a founder in Pune might consider purchasing a 40-person cybersecurity consultancy in London, as it’s often faster and more efficient to acquire expertise than to develop it internally from the ground up.

2. Reaching New Clients and New Markets

Many Indian IT services companies aim to enter the markets in the US or UK, but achieving organic growth can be slow, costly, and challenging. Acquiring a firm with an established local client base and sales team can dramatically change this situation overnight.

I remember a founder from Delhi sharing his experience after acquiring a boutique firm in Texas: “We weren’t just buying revenue; we were buying relationships. They already had CIOs at Fortune 500 companies responding to their calls.”

This strategy is also applicable within India. For instance, a firm based in Hyderabad might acquire a Bengaluru-based company to gain access to clients in the banking, financial services, and insurance (BFSI) sectors. Similarly, a boutique firm in London might purchase a development team in Manchester to secure government contracts. Ultimately, geography plays a significant role, and acquisitions can provide a fast track to market entry.

3. Culture First, Always

Here’s something that spreadsheets can’t capture: culture.

When the Australian firm Nuago (with just 60 employees) agreed to be acquired by Brennan IT, it wasn’t the highest bidder that won them over—it was the one that understood their company culture. Nuago’s founders wanted their team to feel valued and for their way of working to continue after the merger.

Similarly, small IT founders on the buying side think along the same lines. No founder wants to acquire a team that resents the deal or leaves immediately after the agreement is finalised. They seek companies that share their values, work ethic, and a similar approach to serving clients. In the IT services sector, your real “assets” go home every night.

4. Growth at the Right Pace

Every founder faces a choice: grow gradually or take a leap. Organic growth is safer, but it can be slow—often too slow for a rapidly changing market. On the other hand, an acquisition can significantly accelerate growth by introducing new service lines, clients, and geographical markets.

However, what many don’t openly acknowledge is that founders are not pursuing “growth at any cost.” They have witnessed the consequences of overpaying or hastily pursuing an ill-suited acquisition. A prime example is Atos’ acquisition of Syntel, where the company paid more than three times the market value and struggled with integration, ultimately leading to financial difficulties. Founders pay close attention to these cautionary tales; they desire acceleration without the accompanying complications.

5. Legacy and the Human Side of the Deal

Whether buying or selling, most IT founders think about their legacy.

On the buy side, they want to preserve what the seller has built—they aim to enhance it. On the sell side, founders are not merely looking for a check; they want to ensure their team is well taken care of.

This is why many deals include arrangements like earn-outs or partial exits. Founders appreciate flexibility: some may choose to stay on for three years to help transition clients, while others may step away immediately but still provide strategic guidance.

Ultimately, what matters most to founders is the story behind the acquisition: Will it strengthen their company, make their team proud, and better serve their clients?

So, What Does This Mean for Sellers?

If you’re a founder considering the sale of your IT services company, it’s important to understand that buyers are looking beyond just the numbers. They want to know:

  • Will your skills, clients, or intellectual property fill a gap for them?
  • Do your employees align with their company culture?
  • Will this acquisition enable them to access opportunities they couldn’t achieve on their own?

Providing strong answers to these questions is often more significant than presenting a flawless profit and loss statement.

The Bottom Line

Small IT services acquisitions aren’t typically made in boardrooms; they happen through conversations between founders, late-night WhatsApp chats, and quiet gut-checks about whether “this feels right.”

To truly understand how mergers and acquisitions (M&A) work in the IT services sector, you need to grasp what motivates a founder to acquire capabilities they cannot develop on their own, reach new markets, or preserve specific cultures.

At this level, M&A is not solely about financial gain. It encompasses momentum, meaning, and the legacy a founder wishes to establish.

Why Strategic Buyers Are Paying More than Financial Buyers in IT Services Acquisitions

July 28, 2025

If you’ve built an IT services company, you’ve probably had that email land in your inbox.

A private equity firm saying they’re “rolling up” companies like yours.

A larger competitor mentions “synergies” and “growth opportunities.”

On the surface, all buyers seem the same—they’re interested in your company, and you want a fair deal. But here’s the truth: not all buyers see your business the same way.

Some will offer you a valuation that feels like a spreadsheet exercise. Others will surprise you with a number that makes you wonder, “What do they see that’s worth paying extra for?”

The answer often comes down to who the buyer is—and why they’re buying.

Strategic Buyers vs. Financial Buyers (and why it matters)

Let’s strip away the jargon.

  • Financial Buyers (private equity firms, family offices, investors) buy companies to generate returns. They care about clean numbers, good margins, and the potential to “buy, improve, and sell” in a few years.
  • Strategic Buyers are companies—often larger IT services firms, product companies, or enterprises from adjacent sectors—buying for a different reason: your company helps them grow faster, fill a gap, or gain a competitive edge.

One sees you as an asset.

The other sees you as a missing piece of their growth story.

Why Strategic Buyers Often Pay More

Here’s why the same business can get very different offers depending on who’s sitting across the table:

1️. They See Synergies You Can’t Monetise Alone

When Persistent Systems acquired MediaAgility, a U.S.–India–based Google Cloud partner, in 2022, industry insiders reported the deal closed at close to 2x revenue—well above what a private equity buyer would have offered.

Why? Because Persistent could plug MediaAgility’s team and cloud expertise straight into its global operations, it immediately won larger enterprise projects.

That premium wasn’t about today’s revenue—it was about tomorrow’s opportunities.

2️. They Value Relationships and Reputation

A financial buyer sees contracts and client concentration risk.

A strategic buyer looks at how you’re embedded in those clients.

  • Do you have relationships in Fortune 500 companies?
  • Are you trusted in a niche (like Dynamics 365 or cybersecurity)?
  • Does your team have skills they can’t easily hire?

Take Accenture’s acquisition of Flutura (an industrial AI solutions firm) in 2023. Accenture didn’t just want Flutura’s tech—it wanted its deep relationships with oil & gas clients and its reputation as an industrial AI expert. Those relationships don’t show up neatly on a P&L, but they commanded a premium price.

3️. They Pay to Skip the Line

Building a new capability or entering a new market takes years.

For a strategic buyer, acquiring your company is like hitting “fast forward.”

  • Why build a Salesforce practice from scratch when you can buy a 40-person team already running projects?
  • Why spend 18 months setting up a delivery centre in India when you can acquire one and be operational next quarter?

When ThoughtWorks acquired Gemini Solutions in India (2021), they weren’t buying a book of business—they were buying instant scale and a ready-made engineering talent base.

That urgency translates into a higher price.

4️. They’re Playing a Long Game

Financial buyers have an exit clock—usually 5–7 years.

Strategic buyers aren’t thinking about flipping you—they’re thinking about what your business will help them become over the next decade.

A Bain & Co. study found that strategic buyers in IT services regularly pay 20–40% more than financial buyers, because they see your company not as an isolated investment, but as a permanent part of their growth engine.

What Does This Mean for Founders?If you’re a founder thinking about selling—whether it’s next year or five years from now—understanding this difference is critical.

Because if you want to attract the buyers who will pay more, you need to build with them in mind.

How to Attract Strategic Buyers (A Quick Checklist)

  • Own a niche, don’t just “do IT.” Be the go-to shop for something valuable—AI automation, DevOps, Dynamics 365, etc.
  • Make your client relationships visible. Document success stories, reference clients, and your role in their ecosystem.
  • Strengthen your team’s expertise. Strategic buyers pay for talent they can’t easily hire elsewhere.
  • Clean up your house. Even strategic buyers need financials, contracts, and compliance to be clean—it makes integration easier.
  • Tell your growth story. Don’t just present numbers—show how your company helps them grow faster.

The Bottom Line

Two buyers can look at the same 80-person IT services firm and see two different things.

One sees a set of contracts and a profit margin.

The other sees a launchpad for a new market, new capabilities, and new revenue streams.

The second one—the strategic buyer—is the one who will pay more.

If you position your company as that missing piece, you won’t just get offers—you’ll get offers that change what’s next for you, your team, and the company you’ve built.

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