Tech Talent Shortage Is Helping Drive M&A Deals

“With the persistently tight labor market for tech talent, an ever-greater number of companies are willing to put all options on the table, including M&A,” said Tim Herbert, the group’s chief research officer.

While M&A has traditionally been deployed as a growth or competitive strategy, Mr. Herbert said, “segments of companies now see it through the lens of talent acquisition.”

Ryan Niemann, chief executive at low-code software firm Skuid Inc., said adding software engineers to the company’s ranks “certainly plays into our M&A strategy.”

Skuid, based in Chattanooga, Tenn., last week said it had acquired InFlight Corp., which has developed a user-experience platform for human-resources software. The move brings 45 new workers to Skuid, raising its full-time staff to 200. Terms of the deal were not disclosed.

Hampleton Partners, a London-based M&A advisory firm, tracked 902 M&A deals in the global IT and business-services sector last year, a 10% increase from 2020. The pace of dealmaking increased in the second half of 2021, jumping 23%, compared to the same period a year earlier, the firm said.

Jonathan Simnett, a director at the firm, said the upswing comes as companies are being forced to raise IT budgets and spending in response to the impact of Covid-19 on changing workplace and business models. In turn, he added, enterprise IT vendors are being driven to innovate to meet growing demand for new products, capabilities and services.

“The speed required means that for many, M&A has become the new R&D, which has turbo-charged deal activity in the sector, driving up valuations and deal volumes,” he said.

While large IT-sector companies tend to have well-honed recruitment and development systems, he said, every tech deal has an element of “acqui-hire” in it, as the strategy is known. “But pure aqui-hire deals are few and far between and are mostly restricted to early-stage companies,” Mr. Simnett said.

Like any hiring decision, the strategy comes with some risk, Mr. Simnett said. Once a deal is struck, for instance, workers from an acquired company may not be happy with their new corporate owners, “and end up quitting before their value has been realized,” he said.

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 throughout the economy increased by 178,000, CompTIA said.

The gains lowered the unemployment rate for tech occupations to 1.7% in January, down from 2% in December, the group said.

U.S. employers in all sectors added 467,000 jobs in January, while job growth was about 700,000 higher in November and December combined than previously reported, the Labor Department said. The overall unemployment rate rose slightly in January to 4%.

Skuid’s Mr. Niemann said the company continues to have open roles across engineering and marketing. As the company expands its team in the year ahead, he said, “we’re looking at mergers and acquisitions to do that.”

Write to Angus Loten at [email protected]