IT services M&A records 449 deals worth US$14.8 billion in H1 2026 as AI reshapes buyer priorities: EY report

Cloud, data and cybersecurity lead deal activity

According to the EY report, cloud services, data and analytics, cybersecurity and managed services providers continued to dominate deal activity in H1 2026. Large and mid-sized IT services companies pursued acquisitions to strengthen client relationships, expand capabilities and enhance their positioning for large AI-enabled transformation mandates.

Indian and global buyers announced acquisitions across healthcare, cloud, AI infrastructure, cybersecurity, data and engineering services, reflecting continued demand for capabilities that support digital transformation and enterprise modernization.

These trends reflect how technology services M&A and acquisitions are increasingly being shaped by enterprise AI, AI-driven digital transformation and broader technology investment priorities.

AI reshaping acquisition priorities

The EY report highlights that AI capabilities have become an important consideration in M&A decision-making, buyers are placing greater emphasis on three differentiators:

Scale to execute large and complex transformation programs
Deep sector expertise, particularly in highly regulated sectors
Strong ecosystem relationships across leading technology platforms and hyperscalers

At least 10 transactions with disclosed deal values exceeding US$300 million were announced during H1 2026, demonstrating continued demand for scaled assets with strategic relevance.

Strategic buyers accounted for approximately 47% of deal volume, while PE-backed roll-up transactions and direct private equity investments represented 36% and 17%, respectively.

Private equity firms remained disciplined, focusing on targeted investments in managed services, cybersecurity, enterprise applications, data and AI-enabled capabilities.

AI-adjacent segments gain momentum

As enterprises accelerate AI adoption, buyers are increasingly seeking assets that strengthen the underlying technology stack required to support AI deployment.

The EY report notes that data and analytics recorded more than 45 transactions during H1 2026, while cybersecurity accounted for more than 60 deals, supported by both strategic acquisitions and sponsor-backed platform-building activity. The report also highlights that AI-related revenue disclosure remains inconsistent across the industry, making shifts in client demand and commercial models more visible than comparable financial metrics.

Valuations recalibrate amid slower growth

Public market valuations moderated during the period amid slower growth, extended sales cycles and uncertainty around AI-led disruption. Between Q2 2025 and Q2 2026, average EV EBITDA multiples declined from 18.3x to 10.3x for Indian large-cap IT services companies and from 24.5x to 12.8x for mid and small-cap players. While EBITDA margins remained relatively resilient, supported by currency tailwinds and improved utilization rates, ongoing investments in AI capabilities partly offset these gains.

Outlook for H2 2026

The EY report expects IT services M&A activity to remain active but selective through the remainder of 2026. Private Equity platforms from the 2020–22 period are entering their exit phase. Assets demonstrating scale, vertical specialization, ecosystem relevance and resilient standalone economics are expected to remain best positioned to attract buyer interest.

Healthcare and financial services-focused firms are expected to remain particularly attractive acquisition targets, given the growing importance of sector expertise in regulated industries and AI-enabled transformation programmes.

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