The Knowledge Economy Global M&A Report 2019

By Ramone Param, Director, Equiteq

We have released a summary of our detailed review of knowledge economy M&A and investor trends for owners of consulting and technology businesses.

  • 2018 was a year of strong M&A activity within an industry undergoing unprecedented change.
  • Deal volumes, average transactions sizes and median revenue valuation metrics rose.
  • Deal structures were more competitive, as observed by a rise in the upfront cash component and a shortening of the earn-out period for the average deal.
  • The Equiteq Knowledge Economy Share Price Index declined with broader equity market indices, but ended the year well above long-term averages.

Completed deals and media valuation multiples 2009 to 2018

Source: Equiteq Knowledge Economy Global M&A Report 2019

There were large variations in deal flow across knowledge economy segments. The top spaces for deal activity were management consulting and IT services, but the boundaries between adjacent segments continue to blur. North American and European M&A rose, but cross-border deal flow remained structurally higher in the Asia Pacific region. Notable deal flow was observed from serial buyers across segments including Accenture, the Big Four, Dentsu, CBRE and Mercer. We also observed digital acquisitions from high -profile buyers that have historically focused on organic growth including Bain & Co and PA Consulting.

Volumes and growth by knowledge economy segment

Note: Comparative bubble size reflects average revenue multiple in the respective segment

There is currently an abundance of capital among strategic buyers that is maintaining robust strategic buyer activity. We are also observing strong levels of dry powder and fund raising among active private equity investors. Solid levels of capital available for M&A is coupled with skill shortages in hot areas of the knowledge economy, such as innovation strategy, data analytics, product design and digital media. This is maintaining pressure on strategic and financial buyers to put their cash to work on new acquisitions at premium valuations.

As we commence 2019, it is clear from both patterns of organic growth and M&A that the traditional consulting firm and the companies it advises are continuing to transform in a fast-changing interconnected digital world. Equiteq views this revolution as a rapid wave of disruption. There are enormous pressures on knowledge-intensive service providers and their clients operating within the disruption zone. The transformation of the knowledge economy means consulting firms and consumers of consulting services that are shaping the Fourth Industrial Revolution need to be rich in knowledge that remains cutting-edge from a culture of constant innovation. This innovation needs to include a deep understanding of the latest digital technologies that are fusing to enable many of the latest industry transformations.

If you would like to receive a full copy of the Knowledge Economy Global M&A Report 2019 and discuss your current strategic objectives as a business owner or acquisition strategy as an acquirer, please get in touch.

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