IT and software companies in the United States are seeking to acquire smaller but talent-rich peers in Latin America as a solution to negative unemployment of software engineers at home, says Steve Mezak, Vice President, M&A Consulting, at Next Coast Brokerage.
Moreover, with the Federal Reserve cutting interest rates close to zero, funding an acquisition is not a challenge for a U.S. firm, he pointed out in an interview with Nearshore Americas.
It is easier to acquire a company along with its experienced IT professionals than launch an operation from scratch, he said, adding that Latin America will continue to attract IT investors because of its time zone and business cultural alignment with the United States.
Mezak, who co-wrote the book “Outsource or Else!”, says he firmly believes that the remote-working trend will not only encourage more outsourcing but also accelerate a new trend in establishing remote software development operations in other countries through M&A.
Mezak has more than three decades of experience in the software industry. He co-founded several start-ups, including Accelerance, which he sold in 2019. He also profited from the sale of Aspect Development and Digital Market, which were sold to i2 and Agile Software, respectively.
Unlike other industries, Mezak says, IT companies are better positioned to confront the challenges brought on by the COVID-19. “IT service companies that embraced video conferencing and remote-working policies have an advantage in quickly adapting to the new world order,” he added.
Mezak, who also authored the book “Software without Borders“, says the Latin American firms with strong pools of talent will enjoy greater prospects in the days ahead. That’s because the demand for IT talent in North America is exceeding availability and, at the same time, digital transformation is stoking demand for more IT services.
For example, user experience designers in Latin America have a strong sense of how to create software products that are intuitive and easy to use, he said, and their proximity to the US market enables rapid prototyping and revisions.
“Staying abreast of the latest technical trends has not been an issue for LatAm software providers in the past. There are many firms (in the region) with deep experience in machine learning, cloud computing, DevOps, CI/CD and other technical areas,” he said. “American companies are acquiring Latin American firms as a strategy to gain the technical expertise needed and not just a cost saving tactic.”
Mezak, who joined Next Coast Brokerage in August, consults with Latin America software services organizations in considering acquisition opportunities.
To follow up with Steve directly, reach him here.