The Equiteq Consulting M&A Index remains significantly above long-term averages and the Equiteq Consulting Share Price Index achieves a ten-year high.
Global consulting M&A activity, as tracked by the Equiteq Consulting M&A Index, was robust in the third quarter. Deal volumes rose in comparison to both the prior quarter and the third quarter of 2015 with serial acquirers like Dentsu, Accenture and Deloitte continuing to be highly active. Third quarter M&A activity was highlighted by landmark transactions within media and management consulting, as well as the broader IT sector.
The Equiteq Consulting Share Price Index also performed very strongly this quarter, outperforming both the S&P 500 and FTSE 100. The index is now at a ten-year high with particularly strong increases in the management consulting and engineering consulting indices.
The pervasive adoption of cloud solutions is continuing to transform businesses across industries. The most commonly cited drivers for the transition from on-premise to cloud-based technologies are users’ ability to reduce costs, improve risk management and enhance scalability. This evolution in demand is causing widespread disruption to the technology industry, as evidenced by the wave of high-profile restructuring and deal activity amongst the legacy technology players.
Cloud-based applications are complex to implement and manage, which drives demand for cloud services. Salesforce and Workday are considered to be some of the leading vendors of cloud-based applications, with strong networks of specialist consulting partners. We heard at Salesforce’s recent annual Dreamforce conference that they expect a massive increase in the population of Salesforce consultants required globally by 2020. We also regularly receive feedback that there is rising demand and a limited supply of consulting expertise related to Workday. The rising need for capabilities related to both of these technologies is driving organic growth and consolidation in the cloud services space.
Preparing for sale and going through the sales process is time consuming and potentially a very distracting procedure. Interested buyers will demand huge amounts of information on an ongoing basis. And while you’re compiling this, you must also ensure that the day-to-day running of the business continues on its positive trajectory to retain value.
At the heart of the deal support is a finance director (FD) who is up to the task. The FD and finance department are of crucial importance as you will need someone who can stay on top of the hundreds of questions that will be asked during due diligence. If you don’t have someone like that on the team then hire in a contractor; treat selling the business like you would any other project and resource it appropriately.
As well as financial reporting, the FD will also need to keep a close eye on the visibility of booked work and the pipeline. If there are discrepancies between what is forecast and what work occurs, this raises concerns in the minds of investors. Is the consultancy disorganized? Is there internal confusion? Are different processes being used? The FD will need to be on top of the financials and forecast and be able to update the view of the future performance quickly, as this will be requested frequently when a company is being examined for acquisition.
By Jason Parks, Associate Director – Strategic Advisory Services, Equiteq.
We spend a lot of time talking about the three types of consulting intellectual property (IP) with our clients:
IP to run the business
IP to deliver and scale the work
IP to market and sell the business (often referred to as ‘content’)
Of the three, marketing IP is the forgotten child.
Consulting is a crowded and vague market. You’ve got to be heard above the noise and differentiate yourself. To do that and sell higher value work, your sales and marketing engine has to have content that opens and closes sales opportunities.
Specifically, marketing IP does this by:
Reducing the perceived risk in hiring you
Making you more “findable”
Enabling your inbound marketing to attract better qualified prospects
Making your outbound marketing campaigns more effective
Simply put, marketing IP is an umbrella term used to describe any type of information used in some way to acquire customers. This information can be in the form of blog posts, articles, eBooks, DIY or how-to guides, industry news, question-and-answer articles, case studies, whitepapers, videos, podcasts, slide presentations — the list goes on and on.
As the business award season is upon us, Equiteq is delighted to have been named a finalist in key awards on both sides of the Atlantic. The M&A Advisor Awards brings M&A industry leaders together to recognize and honor the top performers, whilst The Lloyds Bank National Business Awards is the UK’s most prestigious awards programme, showcasing businesses achievement.
The M&A Advisor Awards
The M&A Advisor Awards has been recognizing the leading dealmakers, firms and transactions since its inception in 2002. Celebrating the creativity, perseverance and ingenuity of the M&A industry’s professionals, the 2016 ceremony takes place on 9th November, at which Equiteq are finalist in the following 4 categories:
Professional Services (B-TO-B) Deal of the Year
Corporate and Strategic Acquisition Deal of the Year (over $25-$50mm)
Cross Border Deal of the Year (Over $50-$100mm); and
Boutique Investment Banking Firm of the Year – International.
We recently held a series of free 30-minute webinars to help attendees grow the equity value in their consultancy firms and prepare for a sale of their business. Attendees at each webinar submit questions, and we’ve been sharing and answering these questions in a series of blog posts. This week we’re looking at the questions asked during the webinar on how well-managed intellectual property (IP) can enable your consultancy to scale and command a premium price at sale.
1. Can you explain further about the need to protect IP trade secrets and yet still provide the depth of information necessary to market the business?
It is important for consultancies to share high-quality articles, presentations, reports and materials with clients and prospects. Doing so will help consultancies demonstrate industry knowledge and domain expertise. A large percentage of your IP should be readily available to prospects and other stakeholders.
But how do you control access to trade secrets? The foremost priority for any consultancy in such a situation is to understand: (a) who needs to know (b) who needs to have access and in what format? (c) who controls the access to these trade secrets? While there isn’t a shortage of senior executives in charge of marketing, operations, etc., it surprises us how many consultancies fail to assign someone to manage IP. Therefore, appoint a senior member of management to control IP and make sure that they come up with a plan to address the considerations above.
To guard against the misuse of IP firms should make use of non-disclosure agreements and non-compete clauses in employment contracts for when employees leave the business. Internally, consultancies should make clear to staff what it considers IP and train them on how to use and store it safely. Then, the company should enforce this rigorously within the organization.
Why not click here to learn more about how to build intellectual property to drive equity value in your consulting firm.
Equiteq is pleased to announce the sale of Harlex Management Ltd (“Harlex Consulting”) to SNP Schneider-Neureither & Partner AG. Equiteq acted as exclusive financial advisor to Harlex Consulting.
Harlex Consulting is a SAP gold services partner and Tech Track 100 company which helps clients to define and drive clear business advantage through data transformation and data governance.
Dr. Andreas Schneider-Neureither, CEO, SNP AG said about the deal: “The clear focus on corporate IT transformations as well as the structured project approach make Harlex Consulting an ideal partner: SNP will gain access to a highly trained team of experts in the field of SAP data migration. Harlex Consulting also possesses an impressive customer base and extensive project experience. Furthermore, the acquisition will enhance the SNP Group’s presence in the British market. The cooperation offers significant synergy and sales potential.”
Consulting M&A Activity and Equiteq Consulting Share Price Index Performance
In September, we saw a number of high-profile deals being announced, particularly amongst buyers in the IT consulting and broader technology sector. This month also saw the performance of many listed consulting players contained within the Equiteq Consulting Share Price Index being positively impacted by macro-events such as poll results following the debates in the lead up to the U.S. elections and OPEC’s tentative agreement to cut oil production.
Accenture, a listed consultant tracked within the Equiteq IT Consulting Share Price Index, reported quarterly earnings above estimates, highlighting strength in their new bookings and an expansion in their profit margins. The announcement was followed by a 4% jump in their share price.
Accenture remains highly acquisitive, announcing three notable acquisitions this month:
DayNine, a leading 400-person global Workday consulting firm. The acquisition builds on past acquisitions by Accenture to strengthen its enterprise cloud services offering.
Kurt Salmon, a retail-focused consulting business and part of Management Consulting Group plc (MCG) was acquired for $165m in cash payable on completion. MCG’s disposal of Kurt Salmon follows recent exits from its healthcare and French operations, leaving MCG focused on its international operational performance consulting subsidiary Alexander Proudfoot.
OCTO Technology, a French IT consulting business focused on digital transformation and software development. The deal valued OCTO at €115m.