Software M&A overview: Ukraine, Poland, Russia, Belarus

Participation from non-tech players continued to rise, as they closed more deals than technology buyers for a third year in a row. Digital and advanced technologies have disrupted multiple industries, and traditional industry incumbents have increasingly used acquisitions as a means to leapfrog this process. Public markets have rewarded non-tech companies that have pursued acquisitions to address digital transformation, accelerate innovation and develop products that confront disruption/sector convergence within their industries. We believe that companies considering an M&A or financing process would benefit from approaching the right non-tech buyers and should proactively seek to approach these groups to create competitive tension and maximize value.

Software development M&A: executive summary


  • Growth 4-5x faster than globally. CEE outsourcing grows much faster than global average: 20-25%* y-o-y vs 5% globally
  • Strong fundamentals. Fundamentals are very strong for continuous growth, we expect the CEE software outsourcing sector to double in revenue terms within 4-5 years
  • Peak M&A activity in 2018. Peak number of M&A / investments in CEE in 2018: 30 deals announced. Most of the deals closed in 2018 are in the range of 1-2x EV / Revenue and 7-14x EV / EBITDA
  • Leaders` M&A —– IPO / exit play. 5+ well-funded CEE players with revenue around $100M or more are expanding through M&A with the ultimate aim of IPO / exit play.

What are the largest acquirers looking for:


  • Company’s ability to retain and win new large contracts, so that the most of the revenue is recurring
  • Mid-market and/or enterprise clients
  • Above the market revenue growth (consistently over 30% YOY)
  • High EBITDA (over 15%) and Gross margin (over 40%)
  • Founders’ willingness to stay for 2-4 years post acquisition
  • Other strategic rationales might play a role depending on an acquirer – as type of delivery, technology specialization or broad stack etc.

Key strategic rationales driving M&A strategyInorganic growth gives established players a way to expand capabilities, client portfolios and scale


Vertical capabilities


  • Acquisition of new verticals or deepening of existing capabilities. Deal example: Luxoft – IntroPro, 2017 (Media, TV and Entertainment)

Delivery diversification


  • New delivery geographies to diversify market / political risks.
  • Delivery in new countries/regions enables to tap into talent pool.
    Deal example: Endava – Velocity Partners, 2018 (delivery centers in Argentina, Uruguay, Colombia, Venezuela)

Client acquisition


  • Acquisition of new clients or enhancement of current client profile.
  • Small players can be attractive depending on their client profile.

Deal example: GlobalLogic – Rofous Software, 2011 (e.g. LinkedIn, Stryker)



  • Enables companies to bid for larger projects. Deal example: Helmes – Solbegsoft, 2018

Technical / language capabilities


  • Enhancement of tech teams is faster via M&A than through organic growth.
    Deal example: Smile – Adyax, 2018

Future and present of Global software development services 
market. Key insights from latest Global Report. Part 1

The article provides you with brief but accurate information about industry and market insights based on an analysis of Software Development companies with 50+ employees located in the four countries Ukraine, Poland, Belarus and Romania who are considered to be top-5 destinations globally Software development delivery.

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