By David Jorgenson, CEO, Equiteq.
Some may think that once the shareholders agree they’d like to sell the business, then this means that everyone is on the same page and it’s now a matter of finding a buyer. However there are a wide-range of issues that need to be agreed on in order to present a united – and attractive – front to prospective buyers.
Timelines and value are two of the most immediately evident points to agree on. If one shareholder wants to sell now for $1m, the second shareholder wants to sell in 2 years for $5m and the third wants to receive $10m for their share no matter how far in the future, then there needs to be some discussion about how to get the best outcome for all involved.
There is then the practicality of what actually gets paid. A deal can be structured in a variety of combinations with cash, shares and earn out lengths all in play and of differing appeal to shareholders involved. Shareholders will receive a payment which is proportionate to the terms of their agreement and a good deal adviser will keep all parties apprised of changes and what they will be taking out of the business at all times. Before embarking on a sales process, consultancies should ensure they have a well-drafted shareholder agreement to avoid problems down the line when a sale is well advanced.
This week we have a blog from Marc Jantzen, founder and former CEO of Blue Sky Performance Improvement, who sold his consultancy to Capita in 2013. He is now an Associate Director at Equiteq.
We’d been building value in our consultancy with a view to selling it for several years and I was pleasantly surprised at the speed with which we received an offer, and at its size, when we decided the time was right to sell. However this was by no means the only surprise in a sale process during which I learned a lot.
Balancing everyday operations and deal demands
While there will obviously be more work to do during the deal process, the challenge of running the business in parallel with meeting information requests for the deal should not be underestimated. Bear in mind too that if you choose not to share the fact you’re looking to sell widely with staff, you will find yourself requesting information from staff and not being able to explain exactly why you need this data.
And the demands do not fall only on the management team; the finance team’s workload also increases dramatically. If I was going through the process again now, I would hire additional resource for our finance team, because we found that they didn’t have time to keep on top of our debtors like they normally did. This affected our working capital, which is a key figure that buyers scrutinize.
Consulting buyers report “business as usual” with respect to acquisitions in the U.K. and Equiteq’s Consulting Share Price Index continues to rally beyond pre-Brexit levels, supported by the release of a string of robust economic data.
Two months on from the U.K.’s vote to leave the E.U. and the vast majority of the U.K. and overseas consulting buyers that we are in regular discussion with report that it is business as usual as it relates to their strategy for acquisitions. Robust investor confidence in the consulting and IT services sector is also evident from the continued rally of the Equiteq Consulting Share Price Index beyond the levels reached pre-referendum, with some consulting sub-segments touching record highs. This positive sentiment is supported by the strong U.K. and European economic data that has been released over the past two weeks.
As we discussed in our last quarterly update, the initial period following the U.K. referendum was marked by a spike in volatility, particularly as it relates to the trading of equities and currencies. This week it was announced that U.K. manufacturing exports are at their highest level in two years and a Eurozone economic sentiment indicator published by the European Commission rose in July. This market data is painting a more optimistic picture of post-Brexit economic conditions, particularly when combined with the surge in U.K. retail sales and the fall in the U.K. unemployment claimant count, which were both announced this month. These recent economic figures contradict some of the early indications that consumer and investor confidence was falling in July.
By Adam Blatchford, Associate, Equiteq.
You make decisions every day on the direction of your business, but while you work hard to scale your revenue, are you also scaling your equity value? Or could that value be eroding behind your back? Smart scaling is all about having confidence that your decisions are safeguarding that value in the future, and increasing the likelihood of a successful sale.
It is important to consider the future buyer and M&A market appeal of your business, and how your decisions will attract or repel those buyers. When you make decisions there are always trade-offs; understanding what buyers are interested in can help when making the strategic decisions to guide your business and grow your equity value.
Private equity appetite for North American healthcare-focused advanced analytics capabilities remains hot as EQT announces its acquisition of Press Ganey for ~$2.35bn
In our last quarterly M&A update, we highlighted NTT’s landmark acquisition of Perot Systems as one of the major IT services transactions that would complete this summer. Perot Systems is strong in the U.S. healthcare segment and received bids from a number of prolific strategic technology buyers across the globe. The strong interest in the transaction reflected continued deal activity in the broader U.S. healthcare services sector, a segment which is benefiting from the reforms created by the Affordable Care Act (ACA) of 2010. In addition to the provision of traditional consulting and outsourcing services, analytics models and tools are important for healthcare providers to consider the necessary organizational changes required as part of the ACA reforms. The growth opportunities for consulting companies with advanced analytics capabilities has resulted in a number of recent landmark acquisitions in this space, many notably involving the private equity buyer community.
Pierre Briand, Managing Partner, Equiteq Australia & New Zealand, has been announced as a speaker at the Australia Microsoft Partner Conference 2016 which will take place from 5-8 September on the Gold Coast.
Microsoft Australia Partner firm owners will be able to attend two sessions: A presentation by Pierre on the topic of “When is the right time to sell your IT firm?” (Tuesday 6th Sept at 1.00pm), and an interactive workshop, conducted jointly with Sylvaine Masson, Director M&A Services, Equiteq Asia-Pacific, on “Ready, Steady, GO: Are you investor ready?” (Wednesday 7th at 10am).
With deal multiples remaining high and competition to acquire IT services firms with specialist capabilities strong; now is the perfect time for Microsoft Partners to hear first-hand from IT services M&A experts Equiteq, about who is buying, what they are looking for and how to get the maximum equity value for your firm.
Dentsu to acquire majority stake in Merkle, gaining market-leading capabilities in customer-focused data analytics & performance marketing
In our 2016 Global Consulting M&A Report, we observed that last year’s media buyers were dominated by a few large players, with one of the key drivers for acquisitions being their motivation to keep ahead of the competition within the context of a rapidly changing industry. This industry transformation is being led by the digital disruption of business models, particularly as it relates to how companies interact with their customers.
This week, Dentsu Aegis Network, the international arm of one of last year’s top three media buyers, announced their acquisition of a majority stake in Merkle. Merkle is considered to be the largest independent U.S.-based agency focused on customer relationship management and search, managing a vast dataset of first-party customer records. Merkle is also one of Google’s largest agency partners and was one of the first agencies to offer custom audience data relating to Facebook.
Q2 2016 deal volumes remain above long-term averages, and the newly launched Equiteq Consulting Share Price Index rallies strongly, nearing record highs in July.
The general mood during the second quarter of 2016 was already highlighted by uncertainty as compared to the same periods in 2014 and 2015. Then, just as the quarter was coming to a close, the UK’s monumental (and clearly surprising) decision to leave the EU resulted in a spike in volatility, particularly as it relates to the trading of equities and currencies.
We are far from convinced that the immediate impact of the Brexit vote is negative for a variety of reasons, but in any case, we look to longer term market dynamics to frame our advice to clients. When we think specifically about the consulting market, the long-term trend is still very strong in favor of the outsourcing of knowledge-intensive expertise throughout the economy. In the nearer term, the uncertain nature of what Brexit will bring and the very preliminary contingency plans that many companies created is expected to produce substantial opportunities for some consultancies. For example, each of the Big Four have set up new specialist roles and Brexit consultancy teams to help advise both UK clients and overseas businesses trading in the UK. Furthermore, the UK government is reported to have turned to private sector consultants, including McKinsey, for advice on their ongoing exit negotiations with the EU.
Research America, Inc. Acquires Viewpoint Consulting
Deal Size: Undisclosed Industry: Healthcare Date: July 19, 2016
Research America, a nationwide provider of marketing research, qualitative and quantitative surveys and analysis, announces the acquisition of Viewpoint Consulting, a leading agency specializing in Pharmaceutical Payer Research to augment its existing pharmaceutical offerings.
Headquartered in Langhorne, PA, Viewpoint Consulting offers a diverse and comprehensive portfolio of marketing research services to pharmaceutical and healthcare companies throughout the United States. Viewpoint Consulting’s team members have played roles in valuable healthcare payer research conducted by some of the largest, global pharmaceutical and healthcare companies. The acquired firm was founded in 1998. “This is a tremendous opportunity for our staff to realize new projects and growth opportunities. Expanding the services offered to our existing medical clients, allows us to compete for projects on a much larger-scale,” said Robert Porter, President and CEO of Research America.
Equiteq is pleased to announce that it’s client, PMsquare has merged its Australian and Asian businesses with Cornerstone Performance Management. The deal was announced on July 11, 2016. Equiteq acted as exclusive financial advisor to PMsquare.
Both organizations are IBM Premier Business Partners with a focus on the Business Analytics solution set. However, the primary geographical focus of PMsquare is in Singapore and the Philippines, whereas Cornerstone has traditionally been focused on the Australian market. PMSquare’s Australian operations will be absorbed directly into Cornerstone Australia in the coming months, whilst the Asian region will retain PMsquare’s branding as part of the Cornerstone Group.