M&A trends amongst buyers indicate the potential for premium valuations in 2017

 Ramone Param, Buyer Coverage Associate, Equiteq.

We’re pleased to be launching our third global research report from our annual survey amongst buyers of knowledge-intensive services businesses. The report delivers current, actionable intelligence that isn’t available from any other source and covers each of the five consulting segments that Equiteq specializes in: Management consulting, IT consulting, Media & Marketing, Engineering consulting and HR consulting.

Demand for acquisitions remains as strong as last year, with respondents expecting to make nearly 4 acquisitions in the next 2-3 years. However, buyers are seeing a slowdown in the growth of new opportunities coming to market. This may be a momentary slowdown, or it might suggest the start of a period of increasing competition for assets, supporting stronger pricing power for selling shareholders of unique knowledge-intensive services businesses.


For the first time, we provide analysis from the perspective of both strategic buyers and Private Equity (PE) firms. Our research found that PE respondents are willing to pay higher prices than strategic buyers, but are more discerning over financial metrics and the depth of intellectual property (IP), particularly focusing on software and revenue generating IP.


Our survey results suggest that when it comes to deal structuring, around 45% of consideration is typically offered up-front. Buyers highlight that an earn-out is considered crucial to retain key people and normally lasts around 3 years.

There is a strong convergence trend across all consulting segments as buyers look for opportunities to expand service lines to capture wallet and enter new markets. For instance, HR consulting buyers are interested in opportunities within Management consulting. Acquiring a premium strategic consulting capability offers this buyer group with access to the C-suite at clients and a better chance of offering high-value adjacent HR services.

Our research shows that there is robust acquisition demand across all sectors, with Media buyers having the strongest expectations for future acquisition activity. IT consulting buyers have the largest budgets for acquisitions, with buyers and their clients in both of these sectors facing opportunity and disruption from technological change. This is driving strong demand for acquisitions that bring cutting-edge capabilities on-board. Engineering consulting buyers are the most focused buyer group on inorganic growth and a large proportion of these buyers are seeing more opportunities than last year.

A more detailed article covering various other aspects of our research can be accessed here.

We’ll be providing further analysis from this data-rich report in future blogs. The full report, including findings related to your consulting sector, is free to download now here.

If you are preparing to sell your consulting firm and would like to discuss your plans, please get in touch.

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