Consulting Sector M&A Deals for week beginning 23rd November

businessman doing handstand on the beachSolucom SA (France) to acquire certain operations of Kurt Salmon (France)
Deal Size: Undisclosed Industry: Management Consulting Date: November 2015
Solucom announces that it has signed agreement with Management Consulting Group PLC with a view to acquiring most of the European activities of its subsidiary Kurt Salmon, excluding retail & consumer goods consulting. The scope of acquisition in question, hereinafter referred to as “the target business”, comprises Kurt Salmon France, Switzerland, Belgium, Luxembourg and Morocco as well as the Financial Services and CIO Advisory practices of Kurt Salmon in the United States. The consumer goods and retail consulting activities outside of France, notably Kurt Salmon UK and Germany, would not be included in the deal. A key management consulting firm in Europe, Kurt Salmon advises its clients on major transformation issues, ranging from their strategic scoping to the delivery of results. This project is perfectly in line with the strategic guidelines set out in Solucom’s Up 2020 strategic plan. By joining forces, Solucom and the Kurt Salmon’s target business would be looking to become a key player in the consulting market. The new entity would provide a range of sector-specific, functional and technological expertise perfectly in tune with client expectations in the digital era. According to PAC / CXP Group, with revenues of circa €300m, the firm would not only become a major player in Europe but also one of the Top 3 consulting firms in France. (http://www.actusnews.comContinue reading

The equity value impact of associates versus employed consultants

Contractors vs. Consultants Cropped

Consulting firm owners face the constant challenge of deploying the right blend of non-employed contractor resources (associates) with full time consultant employees (consultants). There are three factors driving this management challenge:

  • De-risking the financial overheads in the business as a firm scales
  • Being flexible to meet the peaks and troughs of supply and demand
  • Paucity of skills of the right calibre available for hiring

However, the question that is rarely addressed in forward planning of resources – but often asked when we engage with owners wanting to sell their firms and exit – is how the associate versus consultant model impacts saleability and equity value.

Inevitably, there is no single answer to this as it depends on the acquisition needs of any particular buyer. But we can look deeper at the three factors of interest to buyers.

1) Risk in the acquisition

This is the biggest factor of all. While significant business and cultural synergies may exist, if the risk is high then your firm may be hard to sell and the value too low for you. If the buyer’s confidence in future growth is low, then no matter how attractive the synergies, the price he’s willing to pay will be limited and likely to involve an extended earn out period.

In order for the risk to be low for a buyer, certain operational disciplines need to be de-risked, i.e. embedded in the firm, with a low degree of dependency on the employed individuals, but certainly not associates, such as:

  • Business development for new client acquisition
  • Client relationship management for retention and on-selling
  • Project quality and control for client engagements
  • Intellectual property (IP) driving client value and internal leverage

No matter what the consultant associate model looks like, if these assets exist in strength, then the risk should be low for a buyer.

2) Business model synergy

In the broad world of consulting there are certain segments where buyers themselves use a business model where it is business as usual to deploy contractor resources. The human resources (HR) area of consulting and professional services would be one such segment.

For example, it is normal for a training company to have a high percentage of contractors. Buyers in this space understand that it is difficult to use an all employee model and make money, as the task of managing supply and demand in that environment is too difficult, with the variety of courses they offer and where trainers generally specialize on specific subjects.

So if you plan to sell into a part of the industry where use of contractors is the norm, then if you have also de-risked then a 25/75 consultant to associate ratio may be a perfect fit. However, that organizational structure may also be an inhibitor to other buyer categories that may otherwise see great synergies.

3) Preferences by buyer size category

If the drivers for your consultant to associate structure are not business model related as above, but just a low risk, high profit operating model, then it is more likely that smaller buyers will also value that profile. However for a seller, smaller buyers do not always have deep enough pockets to pay the price that would tempt you away from independence.

Generally the closer you get to a Big 4 buyer the less likely they are to like a high percentage of contractors in the seller. This is because their business model relies on charging high fees for inexpensive junior employees. So if you plan to sell to a strategic buyer with a global brand, then you will probably need the majority of your staff employed, from directors down to senior consultants and most juniors.

Final thoughts

If you want your future home to be close to, or within, the Big 4, don’t use contractors for anything but to manage peaks and troughs. If you think you’re going to sell into same segment of consulting where your organizational model works well, then aim for around 25% employed to cover firm management, development and project delivery quality. If you are happy to sell to the majority of buyers then the ratio of employees to contractors across the firm, including support staff, shouldn’t be more than 50/50. Employees should lead and manage the firm and factors such as business development. And associates should only be used for client delivery, ideally at levels only up to project and work-stream management.

If you’d like to read more about the equity value impact of associates versus employed consultants, please read the full article here.

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners grow and realize equity value in their business. Register here to gain full access. 

Consulting Sector M&A Deals for week beginning 16th November

businessman doing handstand on the beachMarksNelson LLC (USA) acquired Marsh & Company (USA)
Deal Size: Undisclosed Industry: Real Estate Consulting Date: November 2015
Kansas City-based accounting firm MarksNelson LLC has acquired Marsh & Co. in Overland Park for an undisclosed amount. The acquisition adds real estate-related experience to MarksNelson. Marsh & Co. offers help with historic rehabilitation tax credits, low-income housing tax credits, real estate development consulting, cost-certification audits and similar services. “The services they provide, several of those we do not provide for our real estate clients,” Mark Radetic, managing partner of MarksNelson, said in an interview Monday. “We saw this as an opportunity not only for growth in our real estate practice and an expansion of our menu of services we can offer to those clients, but at the same time, to add some great talent. The people Marsh & Co. have are some of the best and brightest.” (

Katz Sapper & Miller LLP (USA) merged with Krouse, Kern & Co., INC (USA)
Deal Size: Undisclosed Industry: Financial Advisory Date: November 2015
Long-time Fort Wayne-based Krouse, Kern & Co., Inc. and Katz, Sapper & Miller (KSM), one of the nation’s top public accounting and consulting firms, with offices in Indianapolis, Fort Wayne and New York, today announced their merger, to be effective Dec. 1, 2015. Together, the firms boast more than a century of providing tax, accounting and business consulting expertise to a wide range of clients in a variety of industries. “Providing quality professional services for our entrepreneurial clients has always been the hallmark of our reputation in northeast Indiana,” said Krouse, Kern & Co. President Richard Krouse. “With this merger, our clients will have access to expanded resources and expertise provided by the KSM network of professionals.” The merged firm will be called Katz, Sapper & Miller and will be located at the current Krouse, Kern & Co. offices at 6509 Mutual Drive. “This is an ideal partnership,” added KSM Managing Partner David Resnick. “Like us, Krouse, Kern & Co. has provided unmatched service to middle-market, family-owned businesses with integrity and excellence. Their 65 years of service in the Fort Wayne market will complement the depth and breadth of resources that KSM offers.” (http://www.prnewswire.comContinue reading

5 minutes with Equiteq’s Paul Beaumont

Paul Beaumont Photo
Name and job title

Paul Beaumont, Growth Director

What do you do at Equiteq?

I work with clients to help them grow equity value so that they will be in a better position to sell when the time comes. The engagement usually starts with our Equity Growth Accelerator diagnostic and then I will help the senior management team to implement the improvements we have identified together.

What do you think is the most interesting aspect of working with consultancies?

The range of topics that people find to consult in is astonishing. It’s always a challenge learning what our clients do, and very satisfying when you’ve got a good enough grasp to be able to help.

What do you enjoy the most about working at Equiteq?

I work with people who are running their own businesses. Every conversation is an interesting one! The clients provide such stimulation; that’s what I enjoy most.

If you weren’t doing this job, what would you be doing?

I’d be a stand-up comedian, but I’m not funny enough, which is why I’m doing this job!
Paul's Book

What’s the most interesting experience you’ve had recently outside of the world of work?

My debut novel, A Brief Eternity, was shortlisted for an international book prize. It didn’t win, but it was nice to be on the list.

What is the most powerful lesson you’ve learnt in your career?

Nobody likes a smart-arse, so don’t be one!

If you’d like to contact Paul, please email him on

Consulting Sector M&A Deals for week beginning 9th November

businessman doing handstand on the beachVisuell Planering & Praktisk PPM (Sweden) to acquire IT Consulting Business in Sweden from Dovre Group AB
Deal Size: Undisclosed Industry: IT Consulting Date: November 2015
Dovre Group’s fully-owned Swedish subsidiary Dovre Group AB has signed today, November 5, 2015, an agreement to sell its IT consulting business in Sweden to Visuell Planering och Praktisk PPM AB, a Swedish privately owned company. Three Dovre Group AB’s employees and all customer contracts will be transferred to the buyer effective immediately. ‘The transaction is good news for our staff and clients in Sweden,’ comments Patrick von Essen, CEO of Dovre Group. ‘The new combined team is stronger, and will be able to support clients better than before.’ The parties have agreed not to disclose the value of the transaction. As a consequence of the transaction, part of the goodwill of Dovre Group’s consulting segment will be allocated against the purchase price and the Group will record a non-recurring, primarily non-cash item totaling approx. EUR -0.4 million in the fourth quarter. The item recorded does not affect Dovre Group’s guidance for 2015, published on October 1, 2015. ( Continue reading

Demand for acquisitions in the consulting sector? What buyers say.

Handshake of businessmen

We’re pleased to bring you the results of our second annual Buyers Research. We commissioned an independent researcher to speak to over 100 consulting firm buyers across North America and Europe. The results provide valuable intelligence for both consulting firm owners with an eye on selling their firms at some point in the future, and consulting firm acquirers wishing to understand buying trends in the current market.

The research found that buyers’ acquisition expectations have more than doubled in the past year and there are huge amounts of capital set aside to enable these acquisitions. Within those spoken to for the research, there are over $7.7bn of funds available for the acquisition of over 400 firms in the next two to three years. This is an 11% increase from last year’s budgets and is encouraging given the continuing economic uncertainty we have seen over the past year.

When it comes to the size of consultancies most in demand, buyers are looking for larger firms than they were last year. On average the target acquisition size for the next two to three years ranges between $18m and $45m in revenues, with an optimum size of $31m. This reflects a 20% increase in size preference at the lower end and a 15% increase at the upper end. However, if you’re looking to sell your firm, it is important to recognize that the vast majority of consulting sector deals are consistently done at the smaller end of the market. Because of this, knowing the right buyers to approach can make the difference between success and failure when selling your firm.

Buyers are polarized in their use of qualitative and quantitative measures when evaluating acquisition opportunities in consulting. Quantitatively, buyers prioritize margins and growth above all other metrics. Qualitatively, buyers focus in on your client base and quality of your intellectual property (IP). A deep understanding of what buyers are looking for will allow you to tailor your approach accordingly.

IP continues to be of paramount importance for buyers, as 68% of all buyers cited IP as being extremely or very important as a factor when assessing potential acquisition targets. When considering the different types of IP, buyers prefer IP that directly generates revenue, or that supports the delivery or standardization of a target firm’s consulting services. While IP plays a key role in buyers’ consideration of consulting firms, consulting firm owners need to draw a clear line between their IP and the real value it creates for the firm.  Forty-five per cent of all buyers found it difficult to understand how the IP in the target firm contributes to the success of those. If you’d like to learn more about this, please view our webinar on how to build IP which will grab a buyers’ attention here.

Earn-outs continue to be a reality for the majority of consulting sector transactions. The ‘average’ deal will include 45% in up-front cash, with the rest over a period of 2.7 years; 83% of buyers measure earn out performance on gross margin, but measures range from partner retention to net profit performance. There is a wide range of ways that deals can be structured and a lot at stake, so the need for good negotiation skills is critical to get the best deal for you and your business.

Finally, once the champagne cork is popped and the focus turns to integrating an acquired consulting firm, the survey found that buyers tend most often to focus on the integration of people above all else in the first 90 days post deal. This is due to the fact that human capital is the real asset of a consulting firm. As any acquisition is a disruptive time for a seller, buyers are keen to ensure their assets don’t walk out the door during or immediately after an acquisition. Following the integration of people, clients are the next highly prioritized area and the more mechanical integration of technology and systems follows on from these. How long do integrations typically last? On average, as a seller of a consulting firm you can expect to be involved in an integration period for just under two years following an acquisition. Buyers start thinking about how a seller’s services will integrate with their own early on, although it is also critical for sellers to consider how integration into a buyer’s firm will impact the firms culture and its ability to retain the attributes that make it successful.

When selling your firm, knowledge of buyers in the market is critical. The more informed you are about buying behaviour and preferences in the market, the better equipped you will be to navigate through to a successful sale.

To read more detail about the findings from the research you can access the full report here.

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners grow and realize equity value in their business.  Register here to gain full access. 

Consulting Sector M&A Deals for week beginning 2nd November

businessman doing handstand on the beachWYG PLC (UK) acquired North Associates (Cumbria) Limited (UK)
Deal Size: $7.6 million Industry: Real Estate Consulting Date: November 2015
WYG stated the acquisition will allow the company to expand its Asset Management and Planning offering across Cumbria and Northern England, including Scotland. North Associates is a specialist asset management consultancy operating from offices in Carlisle. Its clients include commercial developers, public sector bodies and regional landowners. Taylor & Hardy is a local planning consultancy purchased by North Associates in 2013. The move is anticipated to position WYG to benefit from the £90bn investment expected in the development of Britain’s ‘Energy Coast’ in West Cumbria. Paul Hamer, CEO of WYG, said: “We are delighted to be joined by the Managing Director, Andy Ross, and the teams from North Associates and Taylor & Hardy, who have built a strong reputation in the region and have recently won the 2015 Service Business of the year award at the Cumbrian News Group Business Awards. We have collaborated successfully with them in the past on several projects and are confident that their experience in residential, energy and infrastructure markets will significantly strengthen our property asset management team. The acquisition will expand our offering across Cumbria and the North, in particular along Britain’s Energy Coast.” ( reading

Find the best buyer for your firm and employees

Hand holding businessman icon - HR concept

When selling your consulting firm you will reach the point where you go into exclusive negotiations with your preferred buyer. This is after maybe 30 to 60 have been approached, 10 to 20 have expressed interest and of those 3 or 5 want to do a deal. If price is everything to you, then any buyer will do and no doubt you’ve selected the highest bidder. However this is rarely the case, beyond price there are usually other important exit goals.

There are several factors you should consider before going to market to sell your firm and during the sifting process towards closing a deal with your ideal partner.

Life after the sale – is your objective to exit immediately, do your earn-out and leave, or extend your career? If the latter, then the new home must be a company you really want to be a part of, doing the kind of work that inspires you, and provides you with superior benefits to the freedom and entrepreneurial life you’ve experienced so far.

Brand continuation and independence – are you happy for your company to be subsumed, or is it important that your brand grows as a result of new investment and assets provided by your buyer? Different buyers, financial and strategic, will offer different models and achieving the latter objective is more likely with financial investors than trade buyers, the former is more likely with Big 4 type entities.

Staff protection – how important is their future to you? If the reason for the acquisition includes economies of scale, some will be retained and some will go, so who do you want to look after? Buyer selection is key to how their loyalty is repaid. If most of your consultants came out of the Big 4 or other multi-nationals, they may not want to go back. Whereas others may be keen to be a part of a new company with more interesting work, career path and foreign opportunities.

Cast the net wide – considering the above, it will help in categorizing and prioritizing buyer types that may fit. When you take your firm to market, consider all the categories of buyer that may want your firm for different reasons. The obvious candidates are not always the best. Casting the net wide finds the surprise outliers that may offer a compelling opportunity.

Culture compatibility – after you’ve been presented to potential buyers and interested parties are in play, look hard at their culture. You’re coming from an agile, flexible organization, however if the buyer is a bureaucratic monolith, how likely is it that you and your staff can handle the red tape? If not, then the merger is likely to fail, along with your earn-out and legacy.

Price versus deal structure – You may have some good offers from companies that fit your criteria above, but perhaps one is offering an outstanding price. However, the headline price is likely to only provide 50% cash up front; the rest will (hopefully) come in the earn-out over two or three years. If another offer represents slightly lower total price, but is otherwise a better home for the business, you might seriously consider taking what at first appear to be less generous terms. Here is your opportunity to trade headline price for a better deal structure and/or reduced earn-out risk. As well as the best home for your business, you also want the highest possible likelihood of securing the other 50% of the deal.

Make sure you consider all of these factors throughout the process, because you are more likely to achieve a successful sale that ticks all of your hard and soft exit objectives. You will be richer, happier and more fulfilled when you have looked after yourself, your staff and legacy.

If you want to discuss your exit objectives and need a sounding board, please contact us and we’d be happy to help.

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners grow and realize equity value in their business. Register here to gain full access.

Consulting Sector M&A Deals for week beginning 26th October

businessman doing handstand on the beachWest Monroe Partners, LLC (USA) acquired Etherios, Inc. (USA)
Deal Size: $9 million Industry: IT Consulting Date: October 2015
West Monroe Partners, a full-service North American business and technology consultancy, today announced it has acquired Etherios, a consulting firm that specializes in delivering cloud-based customer relationship management (CRM) solutions built on the platform. Etherios, a Platinum Salesforce Consulting Partner and two-time winner of the Salesforce Innovator of the Year Award, was a division of Digi International, a publicly traded global company. “Customer relationship management solutions provide the data backbone for delivering a great customer experience that can drive business growth and success,” said Douglas Armstrong, managing director of West Monroe Partners’ Chicago office. “Etherios brings outstanding technical talent and industry experience that complements our own growing CRM practice and substantially expands the expertise and resources we can offer our clients.” The acquisition of Etherios expands West Monroe Partners’ US network to 10 locations across the country with the addition of offices in San Francisco, California, and Dallas, Texas. (    Continue reading