Management consulting deals had an excellent year in 2015, driven mainly by the significantly high growth in deal volumes across Europe and North America. Our latest annual Global Consulting M&A report showed that between 2014 and 2015 deal volumes increased by 19%, which is the largest year on year increase the sector has experienced since 2010. The fact that management consulting experienced the largest increase of all sectors indicates increasing demand from buyers.
The increasing demand for management consulting firms stems from the rise of new business models enabled by new and disruptive technology, as well as pressures exerted by intense global competition and changing regulatory environments. Businesses are seeing growth and accelerating their own innovation in a rapidly changing business climate, while needing to control costs and minimize complexity. These factors drive demand for management consulting services across many industries, and this in turn drives acquisition demand from buyers who need to add or improve their own advisory capabilities in strategy, financial, operations and/or general business management.
Within management consulting there are several niche areas that consistently achieve high valuations, including financial advisory, healthcare and analytical strategy firms.
Sally Caputo, President and Chief Operating Officer at the Association of Management Consulting Firms, comments on the report: “The growth in demand from buyers for management consultancies reflects the vibrant and exciting state of the industry. Our members are helping organizations address their most pressing business needs and building real value for both the clients they work with, and the consultancies they work in.”
There are some interesting points of note from management consulting transactions that took place in 2015. Estate agency group Countrywide had the highest amount of transactions in the management consulting segment, acquiring 7 companies (5 financial advisories and 2 real estate advisories). Six of the deals were UK based with one in Ireland. Also, we saw that buyers acquired in complementary areas. This trend was best exemplified with Accenture’s and KPMG’s acquisitions of business planning, strategy and operations firms, as well as Verisk Analytics’ big strategic acquisition of Wood Mackenzie.
Looking at specific areas within management consulting:
- Strategy: Deal volumes in the strategy-consulting sub-sector have been consistently growing since 2012. In 2015, there was a significant increase in deal volumes in North America and Europe (43% and 37.5% respectively). Reasons for acquisitions varied but were mainly aimed at improving strategic capabilities, organizational development, business planning and performance, and providing insight on strategic acquisitions
- Operations: In operations consulting, deal volumes slightly fluctuated from 2010-2015, but overall remained at around 55 deals a year. There has been an increase in demand for supply chain consulting capabilities driven mainly by technology advancements. These include enhancement of capabilities in modern supply chain technologies and practices, cloud based supply chain management systems and utilizing supply chain analytics to achieve supply chain efficiency
- Transformation and change: Growth in the volume of M&A transactions has been strong for transformation and change consultancies. The global deal volume growth can be attributed to a 56% increase in European deals. Global deals have been increasing since 2012 and have doubled since the 2010 low. Much of the M&A activity involved larger consultancies, media and IT firms wanting to advise their clients on how to transform and optimize the strategy, sales, culture, operation and technology of a firm to enable digital as an embedded part of the business
- Financial advisory: M&A levels were recovering in 2015 after a drop in 2013. There has been an increasing demand for advisors and, due to the time on-the-job training takes, it has become more popular to acquire and quickly gain expertise. Tighter regulation and new technologies mean that demand for financial advisory services firms is growing
- Compliance, regulation and governance: Saw global deal volumes grow by 5% in 2015, driven largely by European transactions. Buyers in this sector are looking to deepen expertise to address a growing demand, as clients face the pressure to comply with increasing regulatory requirements
Management consulting transactions comprised 21% of all M&A across the consulting industry in 2015. We saw that management consulting transactions were less abundant than IT consulting and media/marketing firms. However, management consulting firms tend to be more specialized by industry or function, and therefore acquisitions are less frequent than in IT consulting or media advisory, where the market is much more fragmented.
View our SlideShare on management consultancies M&A activity here.
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