Buyers expect to complete 5 acquisitions over the next 2 to 3 years
Private equity expect to acquire 75% more businesses than strategic buyers
The optimum turnover size for an acquisition rose 18% since 2016
Strong demand for artificial intelligence, data analytics and Internet of Things capabilities
The Knowledge Economy Global Buyers Report analyzes the findings of our fifth comprehensive independent survey of global strategic buyers and private equity investors acquiring businesses across the knowledge economy. The report provides exclusive insights into current M&A trends among buyers that acquire knowledge-intensive services businesses across five segments: management consulting, IT services, media agencies, engineering consulting and human resources.
Major deals profiled include Cognizant’s acquisition of Softvision, NTT Data’s acquisition of Sierra Systems and Accenture’s acquisition of TargetST8.
Equiteq advised Copperman on its sale to Decision Inc. and Essential Design on its sale to PA Consulting.
The Equiteq Knowledge Economy Share Price Index fell over the month, along with other broader market indices.
Cognizant announces transformational acquisition of Softvision from Tower Arch Capital
Target: Softvision is a global provider of end-to-end digital products and solutions that works with a variety of blue-chip companies. The business has a network of 2,850 professionals with a significant presence in Romania.
Buyer: Cognizant is a US-headquartered global technology services firm.
Deal Value: $550m
Deal Insight: The deal expands Cognizant’s offerings in digital and cloud services to better position it against more acquisitive digital competitors like Accenture. Cognizant will benefit from Softvision’s strong roster of client relationships and experience on high-profile projects. This includes the creation of a disruptive video-streaming platform and an iPad application for US-based healthcare provider Kaiser Permanente. The acquisition also expands Cognizant’s footprint in Romania. Softvision was previously owned by private equity Tower Arch Capital, which acquired the business in July 2015 for an undisclosed sum.
Major deals profiled include Cognizant’s acquisition of ATG, AlixPartners’ acquisition of Zolfo Cooper’s US operations and SAIC’s acquisition of Engility.
Equiteq advised System Partners on its sale to DXC Technology and Mexia on joining Deloitte.
The Equiteq Knowledge Economy Share Price Index fell modestly over the month.
Cognizant acquires ATG, expanding its capabilities in the rapidly growing cloud-based Quote to Cash consulting space
Target: Advanced Technology Group (ATG) is a US-based provider of advice on planning, implementing, and optimizing cloud-based Quote to Cash (QTC) business processes and technologies for businesses. ATG is a global Salesforce consulting partner.
Buyer: Cognizant is a US-headquartered global technology services firm.
Deal Insight: Equiteq recently published a guide for the Configure Price Quote (CPQ) industry at Salesforce’s Dreamforce 18. CPQ forms part of the QTC space and it was clear from our research that the space is seeing rapid growth, particularly as it relates to cloud-based solutions that are transforming the sales experience for businesses across industries. The following software players are some of the leaders that have received considerable investments and / or expanded into the space via M&A.
Apttus was acquired by private equity Thoma Bravo in September 2018;
SAP completed its acquisition of Callidus Software in April 2018;
Salesforce completed its acquisition of SteelBrick in 2016; and
Oracle completed its acquisition of BigMachines in 2013.
The acquisition of ATG marks Cognizant’s fourth acquisition in 2018. The deal is its second acquisition in the Salesforce consulting space after its recent acquisition of SaaSfocus – an Indian digital transformation consulting business that leverages Salesforce solutions. Salesforce consulting businesses continue to observe strong demand from buyers, as the industry benefits from the growth in the adoption of the latest Salesforce solutions.
Major deals profiled include Wunderman’s acquisition of Gorilla Group, Omnicom’s acquisition of Credera and Accenture’s acquisitions of Mindtribe & Pillar.
Equiteq advised DBM Consultants on its merger with Illuminera.
The Equiteq Knowledge Economy Share Price Index rose over the month led by share price rises in various listed management consulting and IT services.
Wunderman acquires Gorilla and WPP announces Mark Read as its new CEO
Target: Gorilla Group is a 370-person global digital agency specializing in eCommerce consulting. In FY2017 the agency generated $40m of revenue.
Buyer: Wunderman is a digital agency that is part of WPP, one of the leading global networks of advertising agencies.
Deal Insight: Gorilla Group will become part of Wunderman Commerce. The acquisition deepens Wunderman Commerce’s eCommerce capabilities in North America. The buyer will also benefit from Gorilla’s strong relationships with key technology partners including SAP Hybris, Salesforce and Magento.
At the end of the month, it was announced in the Financial Times that Mark Read will be named as the new CEO of WPP, succeeding Sir Martin Sorrell. There was a lot of speculation on internal and external candidates that may be chosen as WPP’s new leader. Mark Read had previously held leadership positions at WPP Digital and Wunderman respectively. Read is expected to undertake a strategic review of the business as it faces a range of fresh challenges.
Major deals profiled include IPG’s acquisition of Acxiom Marketing Solutions, S4 Capital’s acquisition of MediaMonks and Accenture’s acquisition of Kogentix.
The Equiteq Knowledge Economy Share Price Index was broadly flat over the month.
IPG’s acquisition of Acxiom Marketing Solutions gives it access to anonymized customer data to enhance its targeted marketing solutions
Target: Acxiom Marketing Solutions (AMS) is Acxiom’s legacy data management business. It consists of a team of 2,100 people and represents about three quarters of Acxiom’s total revenue.
Buyer: Interpublic Group (IPG) is one of the leading networks of advertising agencies.
Deal Value: $2.3bn
Deal Insight: At the beginning of July, the Wall Street Journal reported that Dentsu and IPG were both expected to submit offers to acquire part of Acxiom. IPG followed with its announced acquisition of AMS, which gave it access to customer data that can drive more targeted marketing campaigns for its clients. The deal comes as the leading marketing agencies are coming under pressure from major consultancies and technology firms entering the digital media space. These more recent entrants are utilizing strong data analytics solutions to build effective advertising campaigns.
Data ethics has become an important issue with the adoption of GDPR in Europe and the controversies surrounding Facebook and Cambridge Analytica. Acxiom is considered to have a strong reputation in data integrity, which will have supported the strategic nature of this deal and premium valuation metrics. AMS was part of Acxiom’s Marketing Services and Audience Solutions segments, which generated total revenue of $706m in the year to March 2018.
Strong rise in average deal size and valuation multiples in H1 2018
The number of completed deals fell 5% on H1 2017
Activity remains focused on IT services and management consulting
Equiteq Knowledge Economy Share Price Index continues to reach new highs
Across the global knowledge economy in the first half of the year, average M&A deal sizes and valuation multiples rose markedly, but the number of completed deals fell. Many buyers pushed ahead with a smaller number of larger transformational deals for their businesses at premium prices in the current low interest rate environment. This is against a backdrop of rising signs that quantitative easing programs are coming to an end across developed economies.
The following trends are discussed in more detail in our recent mid-year M&A update report.
Major deals profiled include Ankura’s acquisition of Navigant Consulting’s DFLT and TAS businesses, Warburg Pincus’ acquisition of Capita’s Supplier Assessment Services business and Capgemini’s acquisition of Adaptive Lab.
Equiteq advised The NAV People on its sale to FPE Capital and Dartmouth Partners on its investment from Literacy Capital.
The Equiteq Knowledge Economy Share Price Index declined over the month led by falls in the share prices of listed management consulting players.
Madison Dearborn-backed Ankura acquires significant chunk of Navigant Consulting
Target: Navigant Consulting’s global business segments offering Disputes, Forensics and Legal Technology (DFLT) and Transaction Advisory Services (TAS). Navigant is a listed global management consulting firm.
Buyer: Ankura Consulting Group is a US-based business advisory and expert services firm that is backed by private equity firm Madison Dearborn Partners.
Deal Value: $470m (1.5x FY18 revenue)
Deal Insight:Ankura received $100m of development capital from Madison Dearborn Partners in March 2016. Since this investment, Ankura has grown rapidly, announcing four acquisitions prior to this transaction with Navigant. Earlier this year, Ankura notably acquired management consulting firm c3/consulting, which expanded its strategy and operational consulting capabilities across the United States. Its acquisition of Navigant’s DFLT and TAS businesses is Ankura’s largest deal to date and is a significant opportunity to establish its global footprint.
The divestitures to Ankura focuses Navigant’s operations on management consulting and managed services across high-growth industry verticals, including energy, financial services, and healthcare. Navigant realizes c.$370m in net proceeds after tax and transaction-related expenses. Some of these proceeds will be allocated to organic growth and strategic M&A opportunities, which are likely to be focused on building Navigant’s digital solutions.
Published today, Equiteq’s healthcare and life sciences consulting global M&A report provides exclusive acquisition and valuation insights for consulting firm owners considering a sale. The data reviews M&A, investor and equity market activity in 2017, as well as over the last ten-years. Our unique insights are informed by our regular detailed conversations with the leading serial acquirers of healthcare and life sciences consulting businesses. The following is a brief overview of the key themes from the report, the full version of which can be found here.
Healthcare M&A activity at a glance
371 completed deals in 2017, down 12% year-on-year
Median deal value of $21m, up 14% year-on-year
24% of deals were cross-border
The Equiteq Healthcare Consulting Share Price Index rose28%, while the S&P 500 gained 18%
There were large variations in deal flow among healthcare consulting segments, with stronger activity occurring in spaces like data & analytics and strategy consulting to life sciences companies. The number of completed deals fell, but the median size of transaction rose substantially, indicating that buyers were focused on a smaller number of larger deals.
M&A activity is strong for specialized operational management consulting businesses that provide innovative, data-driven process improvement and cost reduction solutions
We continue to receive feedback from the most prolific buyers of knowledge-intensive services firms that expertise in helping healthcare providers with process improvement and operational efficiency is of high strategic importance for growth. A confluence of demographic, economic and regulatory drivers are forcing providers to improve care standards and enable efficiencies. Providers are also increasingly being compelled to invest in new digital technologies that can create data-driven productivity improvements and competitive advantages. These industry trends are driving strong demand and premium valuations for well-positioned operational consulting firms working with healthcare providers. Equiteq experienced this demand first hand in its sale of c3/consulting to Ankura. c3 has a track record of providing management consulting services to a variety of leading healthcare organizations in the US.
Major deals profiled include OMERS Private Equity’s acquisition of Alexander Mann Solutions, H.I.G. Capital’s acquisition of Conduent’s US-based HR consulting business and Bain & Co.’s acquisition of FRWD.
The Equiteq Knowledge Economy Share Price Index achieved another month of robust gains.
OMERS Private Equity acquires Alexander Mann Solutions, marking the recruiting firm’s fourth private equity buyout
Target: Alexander Mann Solutions is a UK-based provider of workforce solutions meeting its clients’ permanent, contingent and internal mobility requirements through a range of outsourcing and consulting services. Much of its work revolves around helping large businesses to recruit and retain talent.
Buyer: OMERS Private Equity is the private equity arm of OMERS, Canada’s largest defined pension plan.
Deal Value: £820m ($1.1bn)
Deal Insight:The deal marks yet another private equity investment for Alexander Mann Solutions:
In 2013 it was acquired by New Mountain Capital through a c.$418m LBO.
In 2007 it was acquired by Graphite Capital through a $205m LBO.
In 1999 it was acquired by Advent International through a $56m LBO.
Through its string of investments, the business has grown into a global recruiting player with 4,000 talent acquisition and management experts that partner with over 100 clients across 85 countries. The investment from OMERS is expected to enable Alexander Mann to strengthen its sector and regional capabilities, while investing in technology that enhances its offering.