Creating a C-suite to build equity value

If you own a knowledge-led services firm in a sector such as consulting, IT services or media and you want to grow revenues to, say, $30m, it is unlikely that the expertise of the founders will be able to drive this. What you need is a team of specialist C-suite executives on board.

However, at some stage a founders-only team will put a break on growth. Here are three reasons why founders maintain the status quo and fail to see the damage it may be doing to their business:

  1. Growth creeps up on you so you don’t notice the degree to which the requirements have changed

During the start-up phase your main focus will be delivering on your particular domain expertise, but as time goes by you’ll spend more time on anything from finances to dealing with people issues.

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Equiteq advises Aecus Limited on its sale to The Hackett Group Inc.


Equiteq is pleased to announce the sale of its long-term client, Aecus Limited, to The Hackett Group Inc. Aecus is an award-winning European consultancy that helps clients optimize business process outsourcing (BPO), IT outsourcing (ITO) and robotic process automation (RPA) through benchmarking and implementation consulting.

Equiteq acted as exclusive financial advisor to Aecus Limited and its shareholders on the sale of the business having previously worked with the company for over 8 years in a strategic advisory capacity. The transaction closed on April 7, 2017.

Discussing the transaction, Aecus Managing Director Rick Simmonds commented, “We are really excited by this – joining The Hackett Group represents a fantastic move forward for Aecus. The strength of The Hackett Group’s brand combined with the breadth of complementary services will enable us to serve our clients even more effectively and will provide our people with greater professional opportunities.”

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Principles of Maximizing Profitability

There may not be a more fundamentally important topic for consulting firms than improving profits.

Shareholders ultimately want a return on their investment and buyers are looking for evidence of healthy growth, while strong profitability is required to sustain growth and equity realization.

The levers that need to be pulled to improve margin – revenue and cost – might be well understood, but the combination of activities required are often more nuanced.

We’ve identified the top strategies firms can use to start improving profits now:

  1. The leadership team must make profitability an ongoing focus

Profitability has to become embedded in the leadership team’s mindset for sustainable margin improvement to be successful.

Achieving this requires strong communication around accountabilities, clear success measures being established and tactical activities – such as margin exception reporting, resource management, and utilization forecasting – becoming integrated into regular business updates.

Once a shared understanding of what success looks like is established within this team, firms can create strategic work streams – such as market expansion or IP development – and make people accountable.

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Lift & Shift: following the rise to cloud migration

For every consultant who spotted the cloud opportunity and raced to embrace it, there will be another who is still not quite fully convinced.

Clients have spent hundreds of thousands – or even millions – on their on-premise solutions, they are comfortable with their data centres and have established long-term relationships with their maintenance engineers. They’re not ready to give all that up in one go. And, as long they resist a wholesale move to cloud, there’s a role for IT consultants and specialists to offer support for these traditional models.

But the pace of change is quickening; clients have tuned in to piecemeal migration and with software vendor innovation being cloud-focused, the largest traditional consulting firms have seen the writing on the wall, turning to mergers and acquisitions (M&A) as the only credible way of rapidly building their cloud capability.

Shaun Fröhlich is UK managing partner of Incredibleresults, and works with leadership teams to accelerate value growth.

“We are all on a spectrum,” he says. “Many believe the world is changing because of the cloud and it is spurring them on to cash in their chips on their existing business, but there is an almost equal number that remain neutral and see it as an evolution, not reason to trigger a capital event.”

Despite the cloud offering faster, less disruptive deployment and easier global enablement – while cyber-security concerns have increasingly been addressed – migration to the cloud isn’t yet wholesale for most organizations.

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The Australian M&A market outlook

A recent report from Source Global Research suggests Australia has overtaken the US and UK as the second most attractive consulting market in the world – only behind the DACH market (Germany, Austria and Switzerland).

International firms see the Australian economy as a resilient market – which is perhaps no surprise given it’s enjoyed 25 years of consecutive growth – and a strategic outpost to further their goals in Asia. According to the report, the use of consulting services and advisors in the country is now at a level that will garner considerable interests from international businesses and, we believe, act as a catalyst for a significant increase in M&A activity in the coming months.

What’s driving demand for professional services consultants?

The professional services (PS) sector is an important contributor to the Australian economy, employing more than 2.2 million people. Growth in the industry has been driven by demand from complex businesses, which rely on consultants to introduce new innovative processes to improve their products or services and simplify the way they operate.

This trend is reflected in the increased demand for the output of highly skilled labor, the growing use of outsourcing, and a range of technological advancements.

In the last decade or so, Australia has seen sectors such as financial services (FS), mining and engineering grow exponentially, which has driven demand for specialist skills and personnel, creating a high-value and service-based economy.

Geoff Stalley, Partner at Deloitte Australia, said: “Consultants and advisors are in huge demand in Australia at the moment. For instance, the energy and mining sector are increasingly relying on expert consultants to help them build more efficient models and operational technologies to manage risks and significant operating costs.”

And, as technological developments continue to increase the need for a skilled workforce, we can expect fixed wage levels to remain high, attracting even more consultants.

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5 things every consulting firm must know to thrive in Asia-Pacific

Equiteq’s CEO, David Jorgenson, and Jean-Louis Michelet met with Professor Kevyn Yong (Dean of ESSEC Asia-Pacific and specialist of entrepreneurship) at ESSEC Business School in Singapore to discuss the opportunities and challenges impacting M&A activities in the Asia-Pacific region.

This is the third part of their discussion: What advice would you give to consulting firm owners in one of the Asia-Pacific countries?

The consultancy landscape in Asia-Pacific has changed in the last few years. There has been a strong development in the use of consultants as the regional economies have grown and become less dependent on the primary sector, and have seen a surge in secondary and services sectors activities.

A 2016 report from the United Nations Economic and Social Commission for Asia and the Pacific shows the increased activity in the services sector is partly down to its role in facilitating global value chains in the manufacturing sector. It also attributes this to the growth of digital-intensive services in sectors like financial services, telecommunications and digital media and marketing.

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Training isn’t just for athletes

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This week we have a guest blog from Patrick Chapman, Business Development Partner at Elevation Learning.

Everyone agrees that most of the value of a professional consulting firm comes from the people within the organization. In fact, staff in a consulting business are so important that ‘consultant loyalty’ is one of Equiteq’s 8 levers of equity value. So if you want to grow your firm with a view to selling it one day, then nurturing and developing your staff has to be one of your priorities. Unfortunately, when looking to improve financials prior to sale, training is one of the first budgets to be cut. However, this strategy is undertaken at your peril and will end up doing more harm than good.

To build value, your staff team needs to have a shared language and consistent ways of working. This will allow different groups of consultants to come together quickly to form a cohesive unit for each client engagement, meaning truly chargeable work starts more quickly. This ultimately protects your margins and when the value of the whole exceeds the sum of its parts, your bottom line performance will benefit, meaning you’ll be more appealing to buyers.

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Thinking about expanding internationally? Four common misconceptions every business owner should know the truth about

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By Adam Blatchford, Associate, Equiteq

For many business owners, establishing a strong local presence is only the first step on their road to success. Once they’ve achieved this, they want to continue growing the value of their firms, and many are tempted by the thought of expanding geographically beyond their home markets. It is a seductive idea littered with potential pitfalls that could not only jeopardize the business’s financial position but also significantly erode equity value.

In this blog, we look at how you, as a consulting firm owner, can make smart decisions around ‘if’ and ‘how’ to scale your business abroad, to ensure you are protecting and building your company’s value rather than hindering the attractiveness of the company to future buyers.

We’ve compiled some of the most common reasons business owners give for expanding internationally, and the potential risks that those reasons might be hiding.

1. We have exhausted our home market

There is a significant opportunity cost to international expansion; while it can provide opportunities to grow, it is usually far easier to grow in your current market where you already have relationships and credentials. So it should only be attempted if you have truly saturated your market:

  • Be absolutely certain that other factors are not hindering growth

i. Check that your proposition correctly resonates with your client’s issues
ii. Examine if you are competing with internal capacity
iii. Assess your account management to ensure you maximize your current clients
iv. Confirm that your sales focus is on the right type of client

If these issues are the true cause, rather than a saturated domestic market, then they will hinder your progress in the new market too.

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Top 10: What you were reading in 2016

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Welcome back to Equiteq Edge. A new year brings new opportunities for a fresh start. So, as you return to work after an indulgent festive break, we thought we’d provide a quick summary of some of the important things we’ve learnt over the course of 2016 – and that you can apply in the year ahead.

Here’s a list of the most read blogs of 2016.

  1. Sales and profit growth (Part 1): We discussed the importance of revenue and profit, how much marketing you should do and whether an earn out is a given.
  1. Sales and profit growth (Part 2): We covered client concentration, minimum revenue levels and new revenue models in the second part of our sales and profit special.
  1. Does your consultancy have a real value proposition?: Your consultancy’s value proposition is an essential part of its success.
  1. Why equity incentivizing your senior team can improve equity value: Awarding shares (or options) to the right people in the right proportions is one of the most powerful tools at the founding shareholders’ disposal.
  1. Nurturing client relationships to support equity value growth: Client relationships are at the heart of a consultancy’s growth, but they are not all created equal.

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