Equiteq Edge: Countering uncertainty with knowledge to give you and your business the edge

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The decision to sell your consultancy is one of the biggest that you’re likely to make in your life. How and when do you start planning for it? Who do you trust to provide the right insights and information? How do you choose your partner?

The reality is you don’t know what you don’t know. So it is with this introduction, that we present Equiteq Edge, our new thought leadership platform that gives you access to all the information you need: analysis of market conditions, advice from people who have been through the process and even intelligence from buyers themselves.

Whether you are on the cusp of selling, have been approached by a buyer or are planning to sell in the next 3 to 5 years, we’ve created Equiteq Edge to be a ‘must have’.

A highlight of our 2014 Equiteq Edge programme includes our first ever buyers’ insight report. We’ve put key questions to corporate buyers and to private equity firms in both the US and the UK. The report will get into the minds of buyers, what they believe, how hungry they are to buy, what’s particularly on their agenda and hopefully an indication of the prices they’re prepared to pay.

There are a number of ways you can be kept up to date with Equiteq Edge. Sign-up for the reports and newsletters to be delivered to your inbox, join and participate in our Equiteq Edge LinkedIn Group or follow us on Twitter.

Finally we’d love to hear from you. What are the issues and questions that keep you awake at night?

Pouring all we know (what to do and how to do it), all we’ve done (more consultancy deals than anyone else) into Equiteq Edge, we will deliver insight that helps you grow and sell your consulting firm.

We look forward to accompanying you on your journey.

Major hire bolsters global M&A service

usa inwords croppedWe’re pleased to announce David Jorgenson has joined Equiteq as Global Head of M&A and will be based in our New York office. 

David has advised business owners, shareholders and C-level executives on every aspect of growth and value realization during his 20-year career as a technology consultant and investment banker. He is an expert in all aspects of corporate financial advisory – from valuation, strategic financial advisory, public and private equity and debt financing, exit planning, M&A strategy and execution. 

“Equiteq’s transactional M&A expertise offers unique value to consulting firms and the opportunity to grow this service globally is very exciting,” David says of his appointment. “I look forward to sharing my experience with a team that is delivering successful and more profitable deals for consultancies through their deep knowledge of the consulting sector.” 

Paul Collins, Equiteq’s Managing Director says: “We are delighted to be joined by David who brings a wealth of highly complimentary experience to Equiteq. We are committed to growing and developing our service globally and David’s appointment, as well as basing the global M&A team in New York, is an important milestone in the company’s growth.” 

David began his career growing networking and internet consulting companies in the mid 1990’s. After his MBA, Finance at Duke University, David joined Robert W. Baird in Chicago. While at Baird, David provided M&A and corporate finance advisory services to professional services, outsourced business services and technology companies up to $2.0 billion in value. 

David will head the global M&A team from New York. Significant growth of the North American market is expected in 2014. Read our analysis on the market here.

Straight from the horse’s mouth: what buyers want

research croppedIn September we will publish the results of in-depth research carried out with 100 commercial buyers in the US and Europe. The report will contain fresh insight into what buyers want, how hungry they are to buy, what’s particularly on their agenda and an indication of the prices they are prepared to pay.

To mark the launch of Equity Edge, our new online resource and information hub, we thought we would provide a sneak preview of some of these findings now.

In line with our own Global Consulting Mergers & Acquisitions Market Report 2014, buyers have told us they expect the market to pick up and deals to increase in volume over the next 2-3 years. They see more opportunities as economies improve in the US and UK.

What is the optimum size of consulting firm they look for? There is a wide spread between the minimum and maximum turnovers of target consultancies but on average, the optimum is a turnover of around $30 million.

There are a number of factors that attract buyers to a consulting firm, but four were deemed the most attractive. The first is financial stability (sales & profit growth and a reliable future forecast), followed by deep domain expertise in one main service area. Unique and leveragable Intellectual Property is also very important, as is being highly differentiated within the market it operates.

“Equiteq has deep knowledge of consulting firm M&A globally and it knows what buyers want,” says Jim Horsley, Equiteq’s research advisor. “But it also knows that information is much more powerful and engaging if it’s coming directly from the horse’s mouth which is why the buyers’ insight report, based on independent research, will be essential reading for anyone looking to grow and sell their consulting firm over the next few years.”

If you’re not already a member, join Equiteq Edge, to be kept up to date about this and other Equiteq reports.

Consulting Sector M&A Deals for week beginning 21st of July

businessman doing handstand on the beachHot Rock Limited (Australia) to acquire OCTIEF Pty Ltd (Australia)
Deal Size: Unspecified Industry: Engineering consulting Date: July 2014

Hot Rock to acquire an unlisted profitable business involved in environmental consulting and hazardous materials testing and with a laboratory in Brisbane. In the acquisition, Hot Rock will acquire 100% of the shares in OCTIEF Pty Ltd, issuing up to 641,508,710 shares to OCTIEF which is currently worth about $4.49 million in total. The deal is subject to approval by Hot Rock shareholders; the current owners of OCTIEF will receive an initial tranche of 320,754,355 shares. OCTIEF studies mine sites, contaminated land sites, buildings, soils and water, which need to be done as part of government and council development approvals for new project developments. Part of its services offered include industrial hygiene, asbestos and hazardous materials management, environmental services (air, water and soil including contaminated land), greenhouse gas emissions assessments, energy use assessments and specialised NATA-accredited laboratory analysis and on-site testing.

KPMG (Australia) entered into an agreement to acquire Momentum Partners (Australia) Pty Ltd
Deal Size: Unspecified Industry: Management consulting / Strategy Date: July 2014

KPMG has entered into an agreement to acquire the business of boutique consultancy Momentum Partners, a strategy and operational improvement firm with a major presence in the mining industry. Upon completion, the firms’ combined team will create the largest hub of mining professionals within KPMG’s global network. “These acquisitions continue KPMG’s investment-led growth agenda. We are aiming to significantly grow our Advisory presence in the mining sector over the next 3 years, supporting growing demand as the industry adjusts to the changes in its operating environment,” said Gary Wingrove, CEO of KPMG Australia. The global mining industry has seen unprecedented growth, correlated to the industrialisation and urbanisation of China. Supply has responded and the industry is now transitioning from capital growth, to the challenges of operational excellence and working capital management. Momentum Partners (Australia) Pty Ltd provides management consulting services. KPMG is a multidisciplinary consultancy.

The CHR Group, Inc. (USA) acquired EmeryMartin Consulting (USA)
Deal Size: Unspecified Industry: Marketing consulting Date: July 2014

The CHR Group, a New York-based, integrated marketing services holding company, announced that it has acquired EmeryMartin Consulting and appointed Betsy Emery Martin chairman of The CHR Group’s digital practice. This deal represents The CHR Group’s 14th acquisition and sixth office opening since the holding company’s founding in 2012. “Our rate of strategic corporate growth and ability to attract top talent like Betsy has beaten my every expectation for our company,” said Jonathan Zaback, chief strategy officer and partner at The CHR Group. “Betsy brings to The CHR Group a level of digital leadership usually found only at the world’s largest professional services firms. Having Betsy oversee all of our current and future digital companies will truly make The CHR Group a must-meet entity for today’s digitally oriented corporate leadership.” EmeryMartin is a leading technology consulting firm helping some of the world’s most respected brands by driving performance and innovation. The CHR Group, Inc. is an integrated marketing services holding company. Continue reading

Sale of international development consultancy to AECOM

roads merging croppedWe are pleased to announce the successful sale of our long-term client, ACE International Consultants (ACE), to AECOM Technology Corporation.

ACE is an international development consulting business headquartered in Spain, providing economic and project management consultancy to a wide range of governments in emerging economies.

AECOM has been ranked as a leading engineering design firm, with over 45,000 employees, including architects, engineers, designers, planners, scientists and management and construction services professionals. Serving clients in more than 150 countries, it provides a blend of global reach, local knowledge, innovation and technical excellence in delivering solutions that create, enhance and sustain the world’s built, natural, and social environments.

Bruce Ramsay of Equiteq was the lead advisor to ACE and commenting on the deal he said:  “Many consultants in this industry focus just on the delivery of a range of projects, and expect to build value just from their revenues.  Antonio Bonet, founder and CEO of ACE and his team invested in their underlying methodologies, building a single system to support the process from initial market news on potential projects, through all aspects of bidding and project management, right through to invoicing. It was this tight measurement and management of the business, combined with the sector focus, that created the revenue growth and an attractive target for potential acquirers.”

Another successful sale is further evidence the market is turning a corner and that 2014 is likely to see significant growth in volumes and prices, as our Global Consulting Mergers & Acquisitions Market Report 2014 suggests.

We have extensive resources that provide information as to what firms can do to make themselves attractive to buyers in the Growing equity value in your business section within our online resource, Equity Edge.


Significant growth for North American market in 2014

North america croppedConsulting firm M&A activity in the USA has reached its highest level since 2006. Deal volumes in North America – USA accounts for 92% of this, Canada 8% – are up 11% according to our Global Consulting Mergers & Acquisitions Market Report 2014, the only publicly available information on the global consulting M&A market.

Last year we forecast a gentle upturn, and there is no doubt that this has come to fruition. Our prediction now is that 2014 will see significant growth in volumes and prices in the US market. This is in line with the improving macro-economic climate and the general M&A market.

Price rises are another sign of confidence returning. North America saw the greatest increase in multiples used to value companies. Revenue multiples were up 40% in 2013 compared to 2012. EBIDTA multiples have dropped 7.2% but this reflects how firms are becoming more profitable rather than less valuable. Going forward, analysis of the first quarter in 2014 shows prices are stabilizing around 1.2 as a revenue multiple and 6 to 7 as an EBIDTA multiple.

From our own experience, we are seeing a significant rise in the volume of enquiries to the business from North America. These are coming from small and medium-size consulting businesses looking to exit through to larger consulting practices looking for help to find and acquire targets.

However, unlike the previous boom from 2005 to 2007, we do not see a dash for just any sort of consulting capacity. Certainly there will continue to be some large ‘acquisitions of scale’ but rather buyers are looking to acquire capability that they can scale from.

Below we have outlined a number of trends we are seeing in the consulting firm market that is fueling M&A activity:

  • More clients have an international footprint and firms recognize the benefit of having a presence in multiple territories in order to serve clients on a global scale
  • Consulting firms want to broaden the value chain of services offered to clients to claim more of the ‘relationship’ and create a barrier to competition
  • Hot sectors seeing growth are in high demand and include, healthcare, energy, big data and business analytics
  • Independent strategy consulting firms are being acquired as boutique ‘incubators’; they are being kept separate to develop new capabilities

In conclusion, for a consultancy to be attractive to buyers, it is important to have both a market focus and a set of unique capabilities that can be leveraged across the buyer’s network.

We have extensive resources that provide information as to what firms can do to make themselves attractive to buyers in the Growing equity value in your business section within our online resource, Equity Edge.

A copy of Equiteq’s Global Consulting Mergers and Acquisitions Market Report 2014 can be downloaded here.


Merger & Acquisition deal drivers in the consulting sector

cropped buy and sellThe most common reason for one consulting firm to acquire another is to strategically enhance their business e.g. to help reach a new market place or geographic area. However, the growing number of private investors and private equity firms active in the consulting market mean that people are now also acquiring purely for financial and investment reasons.

Our 2014 Global Consulting Mergers & Acquisitions Report in the consulting sector has some statistics on this. In the meantime we’ve outlined what buyers are looking for when considering an acquisition.

Firstly, what are their considerations when the motivation is ‘strategic fit’:

1. Company Scale. Their firm struggles to win lucrative contracts with key clients because their scale does not compare with larger competitors. They need to acquire to achieve the scale necessary to attract the kind of clients that sign the bigger deals.

2. Shareholder Pressure. They may be a plc with pressure from investors to grow shareholder value, but their organic growth options cannot deliver. Acquiring a private firm on a profit multiple less than their own traded multiple will achieve growth faster and add instant value for their shareholders.

3. Global Extension. Their target clients are increasingly global and they don’t have the international profile necessary to compete. Acquiring a company to build a global presence, or achieve a local culture fit, will expand their firm’s capabilities to attract and service clients in their chosen markets.

4. Sector Extension. They have a strong track record in one industry sector, their service is transferable into other sectors, but they know that cost of entry is going to be high. Acquiring a similar firm with an existing track record and a client list in other sectors will accelerate their entry into new industries.

5. Service Extension. They have excellent skills in their domain, but there is a demand for services adjacent to theirs and they don’t have the skills to service it. By acquiring another consulting firm with the competencies they require, they are able to increase their footprint in the combined client list and develop new business elsewhere.

Understanding the motivations of buyers to acquire for strategic reasons, presents an opportunity for you to view your consultancy through their eyes. It can help you assess what aspect of your business makes you attractive to a potential buyer – perhaps even challenging some previously held assumptions about how you grow your business to prepare it for sale.

What are the financial motivators for private equity firms and investors:

1. Pure Investment Potential. They are a wealthy investor who needs to achieve a better return on capital and they are looking for a cash generative business with healthy profits. Service businesses like consulting firms, if well run, have a reputation for delivering high margins and good cash flow. This presents an opportunity to spread the risk and improve the return from their portfolio.

2. Leveraged buy-out. They are a private equity firm with an obligation to provide an outstanding investment return to their fund providers. A private consulting firm, with founders that are ready to retire and a good management team who are ready for the next stage of growth, presents a good investment opportunity. They will buy out the owners for cash, but provide most of that cash through loans against the business. The founders are happy, the firm grows, pays off its debt and both the private equity firm and management team will benefit.

3. Distress Sale or Turn Around. They make their living by finding firms that are under performing but have the potential to do much better. They want to find a mature consulting company with a poor order book and a worn out management team, ready to sell at a significant discount to the potential market value of the firm. They will acquire the firm, turn it around, and sell it on a year or two later for a significant capital gain.

In September we will publish the results of in-depth research carried out with commercial buyers in the US and Europe. The report will contain fresh insight into what buyers want, how hungry they are to buy, what’s particularly on their agenda and an indication of the prices they are prepared to pay.

If you’re not already a member, join Equity Edge, our thought-leadership programme to be kept up to date about this and other Equiteq reports.