Businesses are continuing to capture and interpret customer data, and as data analysis translates into increased profits, the acquisition demand for consultancies in big data and analytics is driven higher. Consider, as an illustration of this trend, the 165% increase in big data services’ global revenue between 2012 and 2014.
Consultancies advising on big data strategies play an integral role in a corporation’s long-term adoption of specific data and analytics technology providers. Because of this, such hardware and software providers have increased their pursuit of partnerships and collaborations with professional services (PS) firms. The sector wide shortage of PS practitioners who are able to implement, interpret and leverage big data is reflected in their revenue: In 2014, PS companies represented more than 38% of big data’s global revenue – almost US$10.5bn.
There are 4 primary drivers that enable acquirers to monetize the broad market opportunity in big data and analytics:
- Leverage existing services: Integration of big data and analytics capabilities into the existing advisory capabilities allows deeper, more robust insights to be drawn out. Integration also lengthens the advisory period by adding a valuable analytics advisory session at the start of a project and the potential for analytics services when nearing the project’s conclusion
- Acquire talent: There is a high demand for professionals with the required analytical expertise – and it can be more efficient to acquire this expertise via an M&A strategy, rather than developing the necessary skills in-house
- Fuel business development: With additional capabilities, there is the potential to increase client and market share by bringing the newer technologies through along with more traditional service offerings
- Gain access to big data and analytics intellectual property (IP): Acquirers are focused on how to remain at the cutting edge of technological innovation, with top consulting firms launching standalone ‘innovation labs’ for big data and analytics. To fuel development of these labs they are adopting an aggressive acquisition strategy
M&A activity in the big data and analytics sector is healthy across the globe, with top buyers being diverse and usually international. In North and South America, Teradata (5 deals) and IBM (3 deals) have been the most active 2010-2016. EMEA has seen SAP make 6 deals and Accenture, 5. In APAC, NTT has been active with 4 deals.
The years 2010-2016 (year to date February 2016) saw a total of 639 transactions in this space with 65% of the acquired firms based in North America. Big data and analytics firms continue to be able to command premium prices; IP and stable revenue growth, coupled with high profit margins and deep sector specialism are reflected in higher multiples for these businesses. These multiples lend themselves to a strong forecast.
With 17 deals in big data and analytics since the beginning of the year already, we believe this presents exciting opportunities for both consultancy owners looking to sell their businesses, and for acquirers determined to remain at the forefront of technological development to increase their market share.
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