Equiteq’s Global M&A report 2015 – Who’s buying?

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For those aiming to one day sell their consultancy, who is buying is naturally of great interest. This week we’ll be delving into our Global Consulting M&A Report to see where the buyers are coming from.

In 2014, 2,274 targets were bought by 1,722 different buyers, meaning buyers in 2014 acquired, on average, 1.32 targets each. This is broadly consistent with a similar ratio of 1.29 in 2013, illustrating that the overall market is steady – neither consolidating, nor fragmenting – as the ratio of new buyers and new sellers entering the M&A market has remained consistent.

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 group, acquired 52 companies in 2014, of which 23 were consulting businesses. They were also a leading buyer in 2013 with 22 acquisitions in the consulting sector during that year.

The second most prolific buyer was Publicis Groupe SA, who provides a range of advertising and communications services worldwide and was also the second most prolific buyer in 2013.

In third place, with 14 acquisitions in the consulting sector, is Japanese telecommunications company Nippon Telegraph and Telephone Corporation (NTT Corporation). They are a keen acquirer of IT consulting and services businesses.

The ‘Big 4’ and Grant Thornton are typically the most prolific buyers. Deloitte have had consistently high levels of acquisition activity per year, although KPMG was the most acquisitive in 2014.

Private equity (PE) is increasingly attracted to the consulting sector for investments and 2014 was a record year for PE acquisitions.

Roughly 85% of buyers are categorized as ‘trade’ or ‘strategic’, where the buyers seeks some form of synergistic benefit from the acquisition. And approximately 15% are ‘financial’ or ‘investment’ focused, buying in the consulting sector for a straight return on their capital. PE groups can be attracted to consulting businesses because they consume very little of the high profits they generate on fixed or working capital. The free cash flow that is generated in many consulting firms can be used to pay back the interest and capital on the loans that are an integral part of PE investments.

If you are selling a firm in Europe, there is a 26% chance that your buyer will be foreign, whereas in the USA it is most likely (88%) that your buyer will be internal. The number of cross-border deals in 2014 is slightly higher than 2013, increasing by 3%. Seventy-five per cent of deals done worldwide were completed by only five countries: USA, UK, Australia, France and Canada.

If you’re interested in a more detailed analysis on any of these areas, more information can be found in our full report. To download a copy you need to be a member of Equiteq Edge – registration takes only moments here.

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