Consulting Sector M&A Deals for week beginning 18th May

businessman doing handstand on the beachThe O’neill Consulting Group Inc. (USA) acquired DMR Advisory, LLC (USA)
Deal Size: Unspecified Industry: HR consulting Date: May 2015
O’Neill Consulting Group, a global retained executive search firm, announced the acquisition of DMR Advisory, LLC. The addition of DMR will further strengthen O’Neill’s vibrant consumer practice and dovetails five years of double-digit organic growth. Like-minded firms, both are members of the Association of Executive Search Consultants. Expanding on the company’s growth strategy, Kevin O’Neill, founder & CEO of O’Neill Consulting Group said, “We are delighted to welcome DMR to the O’Neill family as we continue our efforts to serve clients in new, innovative ways. Doug Rosen, founder & Managing Director, has built an impressive practice and we look forward to his contribution to our existing and expanding client portfolio.” Rosen is an executive search leader and human capital strategist with expertise across the hospitality, real estate, and technology industries. Building on 15 years’ experience, he will continue to manage client relationships in these areas and execute critical engagements for sales, marketing, operations, finance, and human resources professionals. His competencies within organizational behavior and change will continue to serve him in aligning talent with clients’ distinctive cultures and business strategy. O’Neill Consulting Group, Inc. operates as an executive search company that offers talent solutions to clients worldwide. DMR Advisory, LLC provides executive search and organizational advisory services for hotel, real estate, and hospitality technology industries.

NFP Corp. (USA) acquired Hackett Valine & MacDonald, Inc. (USA)
Deal Size: Unspecified Industry: HR consulting Date: May 2015
NFP, a leading insurance broker and consultant that provides employee benefits, property & casualty (P&C), retirement, and individual insurance and wealth management solutions, has acquired Hackett Valine & MacDonald, Inc. (HVM). HVM, based in South Burlington, VT, is a brokerage and consulting firm that specializes in P&C and employee benefits. The firm offers personal and commercial lines expertise and employee benefits capabilities for companies in a range of industries. HVM’s leadership team will remain in place, with Michael Walsh transitioning to Managing Director for NFP’s New England region, reporting to Terrence Scali, Chief Executive Officer, NFP Property & Casualty. Timothy Ford will continue as a Director of Sales, focused on employee benefits, and Richard Bazluke will serve as the Finance Director. Scali said, “The addition of HVM builds upon NFP’s already strong presence in the New England region. The team’s expertise in both P&C and employee benefits, as well as its dedication to providing personalized attention and tailored solutions to their clients, complements NFP’s focus and objectives. We are excited to welcome the HVM team.” Hackett Valine & MacDonald, Inc. operates as an insurance agency in New England. NFP Corp. operates as an insurance broker, consultant, and wealth management company.

MasterCard Incorporated (USA) to acquire Applied Predictive Technologies, Inc. (USA)
Deal Size: Unspecified Industry: IT consulting Date: May 2015
MasterCard is spending US$600 million to add cloud-based analytics capabilities to its portfolio with its acquisition of Applied Predictive Technologies (APT). APT’s Test & Learn platform helps companies tailor investments and maximize bottom-line impact by harnessing analytics to design, measure and calibrate marketing, merchandizing, operations and capital initiatives. The acquisition is expected to help MasterCard Advisors, the professional services arm of MasterCard, improve on the insights it delivers to financial institutions and merchants around enhancing the consumer experience, and forms part of MasterCard’s agenda to deliver differentiated services to merchants. This agenda also includes the acquisition of another firm, 5One, a London-based retail consulting and analytics firm. As part of the company’s services portfolio, Applied Predictive Technologies will now have access to MasterCard’s analytics suite, consulting capabilities, marketing services and global footprint. “In today’s competitive business climate, companies need analytics that are easy to use and drive action,” said Kevin Stanton, president of MasterCard Advisors. “APT’s world-class talent, technology and Test & Learn platform, matched with MasterCard’s analytics, will give our customers the advantage of enhanced and actionable decision making.” MasterCard Incorporated, a technology company, provides transaction processing and other payment-related products and services in the United States and internationally. Applied Predictive Technologies, Inc. provides cloud-based predictive analytics software solutions. Continue reading

Building talent for growth through flexible working – Part one

This week we have a guest blog from flexible recruitment specialists Capability Jane. Today they’re looking at how the world of work is changing and how the various generations now in the workplace have different expectations of their employers. Next week they’ll be writing about the benefits flexible working can bring.

Business consultancies need to be particularly responsive to what their workforce and potential workforce finds attractive as, unlike many other businesses, their product is their people. Recruiting and retaining the right people can make all the difference to a consultancy’s growth. Attrition is an expensive and time consuming factor to deal with, so it’s worth investing time in developing an attractive job offer, which is not just about remuneration.

Government research into the obstacles to success for SMEs found that internal capacity and capability was a major factor holding firms back. Twenty-eight per cent reported that a shortage of skills was an obstacle to their business success. For larger businesses, one in five said that finding staff was their biggest barrier to growth. Businesses ignore these issues at their peril.

The world of work is changing. By 2020, most baby boomers will have retired, while Generation Y will dominate employment, comprising 42% of the workforce. For many of these tech savvy workers, currently aged between 18 and 32, part time, flexible and freelance working patterns are the norm. If employers want to retain their skills, they need to open their eyes to a move away from traditional full time employment. Smart consultancies will already be looking to respond to the needs of these workers.

Part time and flexible working has often been pigeonholed as a female issue, specifically centred around working mums. Indeed, there is considerable demand for flexible and part time options amongst this group. Perhaps surprisingly, however, there is a considerable demand from men too.

Talent article Capability Jane

The leaking pipeline of talent is costing employers dearly – on average 150% of the employee’s annual salary, going up to 200% for a senior role. Our research has found that for an employer with around 3,500 head office staff, the cost to replace lost senior level talent, due to lack of part time working options, equates to over $9m per annum.

Fear of losing the skills your company already has is not the only reason to look beyond the traditional full time, permanent 9-5 contract option. A unique challenge for the future workplace in the next 10 to 15 years is the presence of four generations of workers. Research has shown that the ability to work flexibly and part time is a key requirement for attraction and retention of workers across the generational groups. Those companies that don’t understand the appeal of flexible working may well miss out on the best and brightest staff. And with competition already hot for the best people in the consultancy sector, those not responding to these challenges are missing a trick.

It is clear that the consulting industry is starting to recognise this. Three of the top ten companies that have been awarded the working families benchmark are large consultancies; namely EY, Deloitte and KMPG. Smaller consultancies should look to these firms as an example as they have integrated flexible working successfully. In fact, it can be easier for small consultancies to offer flexible working as they are less constrained by formal procedures. Larger consultancies that have these polices in place may find it harder to embed them in their culture as they will have to convince more line managers about the value of flexible working.

The age of connectivity is upon us and the world of work is changing faster than ever before. In the past workers were shackled to a 9-5 lifestyle in a bricks and mortar office through necessity rather than choice. Now technology is enabling the collaboration and sharing of content with anyone, whenever and wherever it’s needed. Cloud technology and the birth of communication tools such as Google Hangouts, Skype and Facetime mean that employees can be anywhere in the world and still be in ‘the office’. However, flexibility on both sides is key. Working part time is not always easy and consultants that choose this path will often have to do at least 10% more overtime than their peers. To meet the necessary challenges and deliver the service that clients expect, part time consultants often have to leave the office earlier and work in the evenings. For this to work successfully, their colleagues and clients will have to understand and agree to this.

Since the 30th June 2014, every employee in the UK has the right to request flexible working. So with the future already here it’s essential that consultancies don’t miss out on growth due to not having the right people. Offering flexible working options could be one of the best things that your company could do today.

Capability Jane helps innovative and flexible organizations source talented executives on a flexible, part-time or job share basis and access a more diverse pool of candidates. Call 0845 604 1916 for more information.

Eight essential tips for planning for growth and exit

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If you want to grow and sell your consulting firm you need a plan. You can leave it to chance, but the consequences of not planning are well worth noting. Firstly, you are unlikely to grow big enough to become an important acquisition target. Secondly, if you’ve successfully grown without a plan, when the time comes to sell, how can you evidence how past growth has been achieved and show a natural progression to an assured future forecast?

The following list is by no means exhaustive, but contains the eight things we believe are absolutely essential for those planning for growth and exit.

1. Market Proposition

Goal: Focus your growth plan where you have the greatest right to win

Build a matrix showing what services or propositions you provide into what markets (industry verticals, segments, geographies).  If you are selling and delivering all over the place you are likely to be diluting your efforts and resources. Buyers are attracted by a focused set of propositions that deliver value into a clearly defined set of needs and hot issues.

2. Management Quality

Goal: Drive the growth plan top down by delegating profit targets and managing performance

Each member of the management team should own her/his objectives and KPIs that when achieved will deliver the strategy and growth plan. It makes a big difference when everyone is pulling in the same direction. For buyers, the quality, capability, depth and breadth of the management team are of paramount importance in their decision to invest.

3. Consultant Loyalty

Goal: Plan your resources to keep pace with demand generation

Maintaining the right quantity and quality of delivery resources is critical to growth. Make sure you attract, develop and motivate the best quality staff by linking compensation to gross margin and profit growth. Buyers like to see motivated employees who are clear about their role and purpose, who perform well, with appropriate reward and recognition systems. #

4. Sales and Marketing Process

Goal: Plan to create enough qualified leads to deliver a reliable and predictable forecast

You can only generate predictability and consistency when you have a reliable sales and marketing engine running. If you generate qualified sales leads through marketing campaigns and measure the results, you will know the conversion ratios from the top of the funnel (leads) to the bottom (sales). Therefore you can incorporate generating enough demand to satisfy your new business targets in your pan. Predictable and effective sales conversion into targeted client groups is at the core of any potential buyer’s belief and confidence in the future forecast.

5. Intellectual Property

Goal: Identify and develop technology enabled IP to make your business more scalable

Your business plan should include investment in converting tacit knowledge into tangible IP. This will enable you to deliver higher value interventions, in shorter periods of time, at higher fees, with consistent quality of delivery. When you come to sell, buyers place great value on codified methods and tools that enable them to rapidly deploy your propositions. If they can take what you do with 50 people locally and give it to their 500 people globally, that IP is far more valuable than just acquiring 50 more people, all of whom can walk away after acquisition.

6. Quality of fee income

Goal: Plan to grow widely across your addressable market of strategic clients

In order to build a balanced client portfolio, you first need to identify what a strategic client looks like. If that is not done, you are more likely to sell into non-strategic clients and develop a long tail of minor engagements that will clog up the arteries in your firm. A balanced portfolio of existing and new clients gives confidence to buyers. It demonstrates that fee income is not at risk because of client concentration issues and the capability to develop new business is built into your firm.

7. Client Relationships

Goal: Produce account plans to go deep and wide into clients for sell-on and retention

Selling on into existing clients should be the route of least resistance to sales. Develop account plans by growing from your base in the client into white space. Start by drawing the organization chart of the account and ask the questions – Can we sell more work into areas where we have sold before? Which new areas require pro-active investigation and sales campaigns? Relationships at a senior levels, supported by documented managed account plans showing growing revenue streams, are highly desirable for buyers.

8. Sales and Profit Growth

Goal: Plan to grow 20% organically year on year, reliably and predictably

Sales and profit growth is an output of all of the other seven levers. If you’re executing your growth plan you will be driving up sales and revenues, so you will be able to predict future sales with confidence. However your costs will also be growing, so you need to manage your margins. Strong predictable growth in revenue, gross margin and net profit, underpinned with good day rates and utilization are highly sought after by trade buyers and financial investors.

Not having a plan can do serious damage to your growth and equity value. If you’d like to dig deeper on any of the points above, please read our more detailed article on the topic here. You will need to be a member of Equiteq Edge to access it but membership is free and takes only moments.

Consulting Sector M&A Deals for week beginning 11th May

businessman doing handstand on the beachHRPro/BenePro Inc. (USA) acquired Management Impact LLC (USA)
Deal Size: Unspecified Industry: HR consulting Date: May 2015
HRPro/BenePro, a Michigan-based provider of human resources and benefit advisory services and administration, has acquired Michigan-based Management Impact, a human resources consulting firm. The company will become part of HR Impact, the HR consulting services division of HRPro/BenePro. “The acquisition of Management Impact fits exceptionally well and strengthens our portfolio of Total People Solutions services, which will now include advisory and administration services in both human resources and employee benefits,” said Kristopher Powell, CEO of HRPro/BenePro. “We can now provide our clients with a fully integrated solution from the strategy and planning phases to the tactical and administration portion of all of their ‘People’ functions.”

Ricoh (Japan) acquired Ridgian Limited (UK)
Deal Size: Unspecified Industry: IT consulting Date: May 2015
Ricoh, a technology company, through its UK subsidiary Ricoh UK Limited, announced its acquisition of Ridgian, a leading information management consultancy. This investment represents Ricoh’s long term vision to grow its core business, expand its services and further enhance the expertise it offers its clients. Ricoh’s acquisition of Ridgian underpins its central focus: to increase the service it provides to its clients by optimising their business critical document processes; increasing productivity; and improving client responsiveness and knowledge-sharing in business areas that include managed document services; outsourcing; and IT services. It will also create new and mutually beneficial opportunities for Ricoh and Ridgian employees to become part of a larger network within the region and globally. Ricoh Company Ltd is a technology company that engages in office imaging equipment, production print solutions, document management systems, and IT services worldwide. Ridgian offers development based services that range from project management and business analysis through to implementation, testing and support. Continue reading

Equiteq’s Global M&A report 2015 is now available

M&A report crop

Equiteq has just launched our annual report into global M&A activity in the consulting sector – this is the only publicly available information on the global consulting M&A market.

This year’s report has found that while there was a minor dip in deals in 2013, deal volumes recovered in 2014, with a 13% uplift to the highest deal volume seen since 2007. Around 80% of all the 2,274 M&A deals in the consultancy sector were carried out in developed, western markets in 2014, with around half occurring in North America and a third in Europe (mainly in the UK).

There has been an upward trend in EBITDA and revenue transaction multiples and 70% of the M&A volume is from deals of less than $40m.

Shant Yeremian, Equiteq’s Global Buyer Relationship Director, believes that we are in a very positive seller’s market, good news for consulting firm owners who are aiming to sell.

Mr. Yeremian comments: “However, uncertainties are increasing in some markets that may impact the overall picture. We expect the US and UK to continue an overall upward trend in deal volumes and values, while uncertainty in continental Europe, Asia and Africa/Middle East will make these markets less predictable.”

Looking at the most prolific buyers of consulting firms in 2014, the top of the list was dominated by the communications and marketing agencies. WPP, one of the world’s largest communications services groups, acquired 52 companies in 2014, of which 23 were consulting businesses. The agency was also a leading buyer in 2013 with 22 acquisitions in the consulting sector during that year.

Private equity (PE) is increasingly attracted to the consulting sector for investments and 2014 was a record year for PE acquisitions. Looking at the long-term view of private equity or investment buyers in the consulting sector, we see an increasing proportion of buyers coming from this buyer category. This is in line with the overall sentiment in the PE buyer community, which is becoming increasingly competitive and thus looking more favourably on the consulting sector to find their returns.

This market trend report is aimed at shareholders, prospective shareholders, investors and corporate development executives in the consulting industry. It also provides valuable insight for those involved in running a consulting business or those looking to sell or acquire a consultancy.

In future blogs we shall be drilling down into other key areas of the report, such as geographical hotspots, a review of the market broken down by consultancy area and commentary on the overall market.

To download a full copy of the report please click here. You need to be a member of Equiteq Edge to do this but membership is free and takes only moments.

Consulting Sector M&A Deals for week beginning 4th May

businessman doing handstand on the beachT.Y. Lin International Group Ltd. (USA) acquired Lindbergh & Associates LLC (USA)
Deal Size: Unspecified Industry: Engineering consulting Date: May 2015
T.Y. Lin International (TYLI), a globally recognized full-service infrastructure consulting firm, and O’Brien & Gere, a national engineering solutions company, announce that TYLI has purchased Lindbergh & Associates (L&A) from O’Brien & Gere. L&A has a rich history in providing technical services to clients in the Federal market. In operation in Charleston, South Carolina since 1982, L&A will now conduct business as Lindbergh & Associates, a T.Y. Lin International Company. The Charleston-based office will serve as a platform for TYLI as the firm continues to strengthen and diversify its markets across the Southeast and build a strong Federal services program. L&A has an excellent track record in providing Architectural and Engineering services to numerous federal agencies, including the USACE, NAVFAC, the Veterans Administration, USFWS, and USPS, to name a few. “The acquisition of Lindbergh & Associates will foster T.Y. Lin International’s expansion into the Federal market,” said Alvaro J. Piedrahita, P.E., TYLI President and Chief Executive Officer. “We welcome their well-respected staff of planning, architecture, engineering, and construction management professionals to our firm. Combining their state-of-the-art tools, services, and deep knowledge on local issues with T.Y. Lin International’s global presence will result in enhanced support and value for our clients.” Lindbergh & Associates, a T.Y. Lin International Company provides planning, design, and management services. T.Y. Lin International Group Ltd. provides infrastructure consulting services in the United States and internationally.

Arthur J Gallagher & Co. (USA) acquired Burns-Fazzi, Brock & Associates, LLC (USA)
Deal Size: Unspecified Industry: HR consulting Date: May 2015
US-based insurance brokerage and risk management services firm Arthur J. Gallagher and Co. has acquired North Carolina, US-based benefits consultant Burns-Fazzi, Brock and Associates. Founded in 1995, Burns-Fazzi Brock (BFB) provides compensation consulting services specifically for credit union executives throughout the United States. They also specialize in the design, implementation and administration of supplemental executive retirement plans as well as consulting services for welfare and death benefit plans. Christine Burns-Fazzi, Richard Brock, Thomas Telford and their colleagues will continue to operate from their current Charlotte and South Ogden, Utah locations under the direction of David Ziegler, head of Gallagher’s eastern employee benefit consulting and brokerage operations. “One of the reasons our acquisition strategy is so successful is because we continue to find great businesses that fit well with our unique culture and our areas of expertise, and BFB is no exception. This firm has grown consistently over the years by providing exceptional value to its clients through its depth of expertise, strong market relationships and its focus on quality service,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “BFB’s credit union specialization will be a significant addition to Gallagher’s niche practice group strategy and will be a great complement to our compensation and benefit consulting operations. We are pleased to welcome Chris, Rich, Tom and their associates to our growing Gallagher family of professionals.” Arthur J. Gallagher & Co., together with its subsidiaries, provides insurance brokerage and risk management services in the United States and internationally. Burns-Fazzi, Brock & Associates, LLC operates as a benefits consultancy that provides executive benefits and compensation consulting solutions to the credit unions. Continue reading

Why define your exit goals well ahead of a transaction?

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There are many ways you can end up selling 100% of your firm, or some of your stake in it, but will the end result fulfill the things most important to you and yours? If you haven’t identified your goals, then the shape of the deal you ultimately sign may cause great future regret. “If only I’d done this or that” will forever be a thought imprinted in your mind. So the purpose of this blog is to help you formulate your goals by identifying typical owner aspirations. If you do this, then the route-map to the transaction and the terms you sign are more likely to deliver the rewards you want. You only usually get one shot at building a business and selling it, with significant life changing outcomes, so the sooner you define your exit goals, even years ahead of a deal, the better.

Let’s start by categorizing typical aspirations. In the table below there is a simple model to assist in the initial formulation of your goals.

Aspirations

Your aspirations may be simple, for example:

Price is everything, I just want the highest price I can get as soon as possible.

Or it may be a blend:

We want the best deal, but immediate exit for majority shareholders is important, we would trade price for the right buyer and exit terms. The right buyer is important because after our exit we want our former colleagues to do very well.

In following blogs we will cover each of the goals and aspirations in more detail and identify the considerations for each in planning ahead for a sale. Individually and together they require different plans and approaches to achieve the outcomes you want, such as:

  • Designing the business to be attractive to the ideal new home
  • Optimizing the timing of a sale and process approach to maximize the price
  • Designing yourself out of the business at least a year ahead of a sale
  • Planning for an MBO rather than trade sale to enable legacy continuation
  • Planning for a sale to a financial buyer to enable a flexible deal that provides both cash and ownership continuation.

In summary, if you don’t plan ahead, your goals are unlikely to happen by accident and you will accept the first unsolicited buyer approach that comes your way, without knowing how good or bad a deal it is! If you do it by design, then you can control the results.

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