According to industry analysts, a shortage of information-technology workers is prompting some companies to buy firms for their employees, a strategy that is helping to drive up the number of merger-and-acquisition deals across the IT and business-services sectors.
Employers posted roughly 340,000 unfilled IT job openings last month, 11% more than the 12-month average, spanning a variety of positions, industries, and locations, according to an analysis of Labor Department employment data released Friday by IT industry trade group CompTIA.
“With the persistently tight labor market for tech talent, an increasing number of companies are willing to consider all options, including M&A,” said Tim Herbert, chief research officer at the group.
While M&A has traditionally been used as a growth or competitive strategy, “segments of companies now see it through the lens of talent acquisition,” according to Mr. Herbert.
Accenture PLC, one of the more prolific acquirers last year, invested roughly $4.2 billion across 46 acquisitions in its fiscal year 2021, ostensibly to “add skills and new capabilities in strategic, high-growth areas of the market,” according to a spokesperson.
According to Ryan Niemann, CEO of low-code software firm Skuid Inc., adding software engineers to the company’s ranks “certainly plays into our M&A strategy.”
Skuid, based in Chattanooga, Tenn., announced last week the acquisition of InFlight Corp., a developer of a user-experience platform for human-resources software. Skuid will gain 45 new employees as a result of the relocation, bringing its total full-time staff to 200. The deal’s terms were not disclosed.
Last year, Hampleton Partners, a London-based M&A advisory firm, tracked 902 M&A transactions in the global IT and business-services sector, a 10% increase from 2020. According to the firm, dealmaking increased by 23 percent in the second half of 2021 compared to the same period the previous year.
According to Jonathan Simnett, a director at the firm, the uptick is due to companies being forced to increase IT budgets and spending in response to the impact of Covid-19 on changing workplace and business models. As a result, he says, enterprise IT vendors are being pushed to innovate in order to meet rising demand for new products, capabilities, and services.
“Because of the speed required, M&A has become the new R&D for many, which has turbo-charged deal activity in the sector, driving up valuations and deal volumes,” he said.
While large IT companies typically have well-honed recruitment and development systems, he claims that every tech transaction includes an element of “acqui-hire,” as the strategy is known. “However, pure acquisition-hire deals are few and far between, and are mostly limited to early-stage companies,” Mr. Simnett explained.
The strategy, like any hiring decision, carries some risk, according to Mr. Simnett. Workers from an acquired company, for example, may be dissatisfied with their new corporate owners and “end up quitting before their value has been realized,” he said.
According to CompTIA, U.S. tech-sector companies added 24,300 workers in January, marking the 14th consecutive month of tech employment growth, while IT jobs at companies across the economy increased by 178,000.
Tje gains reduced the unemployment rate for tech occupations to 1.7 percent in January, down from 2 percent in December.
The Labor Department says employers in all sectors in the United States added 467,000 jobs in January, while job growth was about 700,000 higher in November and December combined than previously reported. In January, the overall unemployment rate increased slightly to 4%.
Mr. Niemann of Skuid stated that the company still has open positions in engineering and marketing. “We’re looking at mergers and acquisitions to do that,” he said, as the company looks to expand its team in the coming year.