By Ramone Param, Associate Director, Equiteq.
Equiteq’s quarterly market updates provide an indicative guide to current M&A market conditions in the consulting industry. However, it should be noted that we typically observe large variations between quarterly M&A volumes, which are not always reflective of longer term trends.
M&A activity was mixed in the second quarter after a strong start to the year. Overall global deal activity in the consulting sector fell by 12% quarter-on-quarter. Deal volumes fell by just 2% on the same quarter last year. The Equiteq Consulting Share Price Index rallied in the second quarter, achieving similar returns to the S&P 500.
We expect robust deal flow in the second half of the year to be underpinned by strong balance sheets of prolific strategic and financial buyers, continued access to cheap debt, and the growth of highly acquisitive listed consulting buyers.
Strong deal flow in IT, HR and Media, and high-profile deals across all sectors
Deal activity remains robust in IT Services, as well as the Media sector. In the HR segment, year-on-year growth in M&A volumes rose markedly. Although deal flow in the Management consulting and Engineering sectors has declined this year, there was a number of notable deals in these segments.
Accenture was the most acquisitive buyer, acquiring 11 businesses, with notable deals in spaces like intelligent automation, Salesforce consulting, and agile transformation. These deals came as Accenture announced a $1.8b acquisition plan for the current financial year, which is believed to far surpass the recent spending of many of its biggest competitors combined.
New Mountain Capital’s acquisition of OneDigital Health and Benefits is one of the largest deals in the Human Resources space this year, following Blackstone’s acquisition of Aon Hewitt’s technology-enabled benefits and cloud-based Human Resources platform earlier this year.
The second quarter also ended with another major private equity investment, as Tata Motors and Tata Capital agreed to sell a stake in Tata Technologies to Warburg Pincus for $360m. Tata Technologies provides outsourced design, engineering, and research services to manufacturing companies.
Share prices continue to reach new highs
The Equiteq Consulting Share Price Index continues to show record highs as investor confidence in the sector remains buoyant. The index is at a significant premium of c.45% as compared with its ten-year average. The index has achieved strong growth in the first half of the year along with many major global share price indices. The Engineering, HR and IT Services sub-indices were the strongest performers.
As we go to press, DXC Technology have announced a major acquisition in the Microsoft Dynamics space. Bloomberg also reported a potential sale of The Advisory Board’s health division to UnitedHealth and education division to Vista Equity Partners.
The current market conditions continue to remain favorable for sellers of sale ready consulting businesses.
If you are thinking of selling your consulting firm and would like to discuss your plans, please get in touch.
Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners prepare for sale and sell their business. Register here to gain full access.