As part of our quarterly market insights, we look at a sub-sector within Technology and speak to three Institutional Investors across private equity (LDC), debt (Kartesia) and public markets (Toscafund) about their current views on the managed services sector and longer-term outlook.

After a very strong market in 2021, with valuations and M&A activity at record highs, the market changed significantly in 2022. A worsening macro situation with a slowdown in demand in some areas, significant inflation and now interest rate rises has led to a different valuation environment. Public markets have been under pressure, with valuations decreasing across the board and a significant slowdown in fundraises and IPO activity.

Despite that, there has been a flight to quality, with institutional investors focussing on resilient, growth sectors, leading to more capital chasing fewer opportunities. Within private markets, this has led to a bifurcation in transaction multiples, with perceived higher-quality assets commanding premium valuations whilst there has been some softening at the lower end.