July 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include Bain Capital’s acquisition of Kantar, Tech Mahindra’s acquisition of Mad*Pow and PA Consulting’s purchase of 4iNNO.
  • Equiteq advised WGroup on its sale to Wavestone and RevUnit on its investment from Mountaingate Capital.
  • The Equiteq Knowledge Economy Share Price Index dipped slightly over the month.

WPP sells research and analytics business Kantar to Bain Capital.

Target: Kantar is a UK-headquartered research, data and insights business that was owned by global marketing network WPP.

Buyer: Bain Capital is a US-headquartered multi-asset alternative investment firm.

Deal value: $3.1bn (1.5x TTM Dec-2018 revenue)

Deal insight: In June, The Drum reported that WPP was in the process of selling Kantar. It was noted that Vista Equity Partners, Apollo, Platinum, as well as Bain, were four US private equity’s bidding for the research unit. The private equity focused process exemplifies a broader trend of strong demand for major knowledge-intensive services businesses from cash-rich financial buyers that are supported by robust fresh fundraisings. Kantar’s investment from Bain Capital follows the financial buyer’s acquisition of digital consulting firm Brillio in January.

WPP is undertaking a crucial transformation of its business following the resignation of Sir Martin Sorrell last year and Mark Read’s appointment as the marketing network’s new CEO. WPP recently sold its stake in Globant to pay down debt and announced internal mergers of agencies to create a more comprehensive digital-focused offerings for its clients. This is part of a three-year plan of “radical evolution” that was outlined by Read to improve WPP’s business performance. This is aimed at better positioning WPP for growth by countering new competition from innovative non-traditional media competitors from the consulting and technology sectors.

Tech Mahindra acquires US-based design firm Mad*Pow.

Target: Mad*Pow is a US-headquartered design agency that strives to help people improve their health and wellness, meet their financial goals, learn and connect.

Buyer: Tech Mahindra is an India-headquartered IT services firm.

Deal insight: The acquisition of Mad*Pow marks Tech Mahindra’s first deal in the design space as the buyer continues to build its consulting and digital capabilities in North America. The deal follows the technology buyer’s acquisition of Canadian IT consulting firm Objectwise Consulting in June. The transaction also follows acquisitions across the creative agency space by competitors like Accenture, Capgemini, as well as Indian outsourcing competitor Infosys which acquired US-based creative agency WONGDOODY last year.

Traditional IT outsourcers are pivoting their service offering toward the latest customer-focused digital capabilities, using M&A as a tool to enable this shift. These capabilities offer strong growth and high margin opportunities to counter the impact of a shrinking traditional outsourcing market. There is also dtrong demand for acquisitions of North American digital businesses with local staff by overseas IT services buyers ahead of the continued expected tightening of H-1B visa rules in the US. Many overseas IT firms still rely upon current visa regulations to fly engineers and developers to the US to provide services to clients.

PA Consulting acquires innovation consulting firm 4iNNO ahead of a possible strategic review.

Target: 4iNNO is a US-headquartered innovation consulting firm.

Buyer: PA Consulting is a UK-headquartered global innovation and transformation consultancy with backing from private equity investor The Carlyle Group.

Deal insight: PA Consulting’s acquisition of 4iNNO deepens the buyer’s innovation expertise in the US. The deal marks its second acquisition in North America following the purchase of innovation strategy and product design agency Essential Design in October. Since PA Consulting’s investment from Carlyle in 2015, PA Consulting has acquired five businesses, three of which were purchased in 2018. The business also been growing organically, notably announcing the creation of 400 jobs in Belfast over the next five years as part of a major government-backed expansion of its digital team. Its growth has enabled it to work on various high-profile consulting engagements, which includes Virgin Hyperloop One, a potential disruptor to the transport sector. According to a recent report in Sky News, Carlyle has selected financial advisors to oversee a strategic review of PA Consulting during the next few months.

Selected Knowledge Economy M&A announced in July:

Knowledge Economy Share Price Index:

Source: S&P Capital IQ

Are you a member of Equiteq Edge? It’s full of content to help owners of knowledge-intensive companies prepare for sale and sell their businesses. Register here to gain full access.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.