Webinar – achieving a scarcity premium in the post-Covid M&A market

Earlier today, our team joined owners of global Knowledge Economy firms to review the state of sector M&A, and explore the possibility of achieving a premium in the market as Covid-19 wanes.

Take-aways below.

Here’s the recording:

Presenters: Head of North American M&A, Jeff Becker, was joined by two of our London-based MDs, Jerome Glynn-Smith and Paul Dondos.

Key take-aways:

  • A few weeks ago, we made the at-the-time contrarian assertion that despite paralysis, volatility, the unfortunate human impact of C-19, and the general unknown, it might be a good time to think about realizing equity value
  • Day by day, that perspective has seemed less outrageous – we see that the immediate health emergency has passed, tailwinds are stronger, deals are progressing, and buyers are strongly engaged with the deals that are emerging

  • The pandemic has accelerated opportunities for firms providing digital transformation, consulting and technology partner services globally – especially for firms exposed to Financial Services, Government, and Healthcare/Pharma sectors
  • Risk averseness of buyers and sellers in March and April 2020 has created a bottleneck in the market that is currently increasingly being relieved. This will create an influx of transaction opportunities and a revival of deal volumes in Q4’2020
  • We are not seeing valuations impacted, as private transactions will follow the recovery of the public markets and in particular high-quality assets will be in strong demand
  • We have seen strong activity at Equiteq across the Covid period with deals closing at the beginning of the crisis. We have close to 20 ongoing projects at different stages from marketing to definitive documentation negotiations – projects are progressing thanks to a combination of asset resilience, acquirer intent, and creative deal-making
  • Our own pipelines for near-term decisions/kick-offs of sellside mandates have more than doubled since mid-May, with PE firms encouraging us to bring our better clients to market ASAP. Meantime, our buyside activity/engagements are at their highest level of all time
  • We are still not far removed from one of the best deal markets in recent memory, with momentum increasing

  • Owners of firms considering entering M&A should assess whether they are well-positioned to execute a successful transaction in the near-to-mid term, to take advantage of the current window and the continued shortfall of high-quality assets (ahead of a potential wave of supply from owners who deferred a decision)

Equiteq Edge Monthly Update – Potential for a scarcity premium in the Knowledge Economy M&A market?

Since early May, we’ve been cautiously – and increasingly – optimistic about prospects for Knowledge Economy M&A as the C-19 epidemic passes.

Accordingly, we recently ran a webinar “Is now the time to Realize Value?” for those in our community that have continued to perform strongly through C-19 and proven their businesses are highly resilient.

Key take-aways and recording are available on this blog – email info@equiteq.com if you would a copy of the slides.

In the three weeks since this webinar, our team has become even more convinced that an advantageous window for value realization is opening in the market.

Deals are getting done with minimal impact on valuation (unlike in 2008/09), and there are active buyers and investors in the market.  What’s more, the underlying drivers for M&A are intact – there are record levels of private equity ‘dry powder’ on the sidelines, and the strategic rationale for trade buyers to acquire is as strong as ever.

This large pool of investors/buyers is not seeing adequate deal flow of high-quality acquisition targets. Owners of firms that are positioned to be among the early waves of new deals to come to market will meet this pent-up demand and may command a market premium.

Our next webinar, on June 26th, will dive deeper on this them, addressing the question: “Can your business achieve a scarcity premium in the post-Covid M&A market?”

You can register for that webinar here.

In the meantime, here are some highlights from the last month:

  • Knowledge Economy Share Price Index continued its recovery from March lows, in line with broader equity indices. Almost all sub-sectors are not above the value of 1 year ago. It’s also interesting to note that over the longer-term, the Knowledge Economy index is handily outperforming the S&P 500, reflecting the importance of our sector to economic growth, and the increasing application of technology within sector firms
  • Major deals. Profiles highlighted this month are:
    • Cognizant’s acquisition Collaborative Solutions (Workday services)
    • CyberArk’s acquisition of Idaptive (identity security)
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M&A boom for Cloud MSPs focused on AWS and Azure

Following on from deals in the space by Accenture, IT Lab, Cognizant and NTT Data in recent weeks, another five cloud deals announced just this week. Just one of the hotspots we’re tracking in the Tech Services space.

(Equiteq’s first Cloud Consulting M&A report was in 2014 – we were excited about 70 globally deals in the whole year, and predicted it as a major trend.)

2nd June – ProArch (Atlanta) Acquires iv4
Read full article here >

3rd June – Netreo Acquires CloudMonix (Azure)
Read full article here > 

3rd June – Navisite acquires Privo  (AWS)
Read full article here > 

3rd June – Deloitte Ireland acquires DNM (next gen AWS)
Read full article here >

3rd June – Effectual acquires Five Talent (DevOps)
Read full article here >

Grow Equity Value Webinar – June 17th

Join Paul Beaumont, our Strategic Advisory Director, for a new webinar “Growing Your Consulting Firm’s Value During Uncertain Times.”

Please use this link to register.

Taking positive action during challenging times to increase value within your business will set you up for success when the industry returns to a stronger climate.

Alongside our friends at Deltek, we’ll be offering advice on growing your client relationships, improving consultant and management loyalty, your market proposition, the quality of your fee income, and more.

Webinar highlights:

– The positive steps you can take now to ensure your firm is prepared for the future

– Discover the areas of your consultancy where you can drive value

– See how technology solutions from firms like Deltek can deliver improvements in key areas of your business

– Don’t just survive, ensure you emerge stronger