What do M&A opportunities in Asia-Pacific look like?

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 second part of their discussion: How do the differences between regional APAC markets impact M&A activities in the B2B services sector?


There are essentially five sub-regions in APAC, each of them with specific characteristics:

  • China, Hong Kong, Taiwan

China is a huge economy, but the services sector is still at a relatively early stage. There aren’t many home-grown companies developed by local entrepreneurs that have reached ‘international investor-grade’. In recent years, however, several large Chinese companies have shown an interest in acquisitions in the region and beyond, with a view to reducing their dependency on their domestic market and gaining international credibility. Hong Kong stands out in this regard, because it’s a vibrant market with established global consultancies.

As an example for China, BlueFocus has managed, through an aggressive acquisition strategy, to boost the topline growth of its digital business, which has accounted for 73% of total group revenue in  2016, doubling the proportion recorded in 2015.

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Global interest in the Asia-Pacific service sector is set to drive a new wave of M&A activity

Image result for 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 first part of their discussion: What are the challenges and opportunities for the B2B services sector in Asia-Pacific over the coming years?

The B2B services sector in Asia-Pacific (APAC) is not as developed as its counterparts in North America or Europe mainly because the primary and secondary sectors still remain the main engines of economic growth in the APAC region. As these sectors reach maturity, the services sector will follow suit in the years to come.

Another major challenge for B2B consulting firms in the APAC region was the relatively low appreciation for services in most Asian business cultures. This is mostly the result of the region’s greater emphasis on tangible, physical items that can be traded.

Also labour costs are generally lower in APAC than in Europe or North America – with notable exceptions in Japan, Australia, New Zealand, Singapore and Hong Kong – meaning companies tend to be less pressured to increase productivity by improving their business processes.

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Key trends in the Australian B2B services M&A market

Australia & ChinaIn 2014 Australia became the second largest M&A market in Asia-Pacific, behind only China in volume and value terms. And across all industries, 2015 saw Australia M&A totals reach $146b, versus $117b in 2014, highlighting that there are exciting opportunities for both sellers and buyers in the “Lucky Country”.

The B2B services market in Australia is mature and vibrant across a number of segments, such as digital marketing and engineering. And while growth has slowed as a consequence of the evolution of the Chinese economy and the mining industry, it’s good timing for acquirers seeking targets and for sellers interested in joining larger organizations. The Australian dollar is at its lowest point against the US dollar in 7 years, a situation that is particularly appealing for international buyers. The country is demonstrating economic stability with prudent policy making, close trading relationships with China and well-targeted fiscal stimulus. The middle market and SMEs are the cornerstone of the Australian economy.

All the major global players in B2B services have operations in Australia and cross-border deal flows are healthy, with foreign investment (30% from the US, 45% from Asia, 10% from the UK) and outbound acquisitions.

Data from our Global Consulting M&A Report 2016, the only publicly available information on the global consulting M&A market, found that 75% of deals done worldwide were completed by only 5 countries: the US, UK, Australia, France and Canada.

Figure 18

Asia Pacific accounted for around 13% of all deals, largely driven by activity in Australia. The country experienced 3% growth in 2015 deal volumes, recovering from a 2014 decrease in deal activity of 5.8%. Its deal volume increases in 2015 were aided by falling commodity and currency prices that helped keep acquisition targets in the region competitive to international buyers.

Our research shows that buyers’ acquisition expectations have more than doubled in the past year. This reflects a growing M&A market in consulting, IT and other segments, underpinned by buyer appetite that continues to increase in size and volume across corporate and private equity buyers. With Australia having seen 25 years of consecutive economic growth and enjoying a thriving B2B services sector, we can see an exciting year of activity in this market.

If you are preparing to sell your consulting firm and would like to discuss your exit plans, please contact Pierre Briand, Managing Partner, on Pierre.Briand@equiteq.com

Facts and figures on Australia:

  • Population of 24m with Melbourne and Sydney combined reaching almost the 10m mark
  • 2015: GDP +2.3%, CPI +1.7%, unemployment rate 5.9%, GDP/capita US$64k
  • 12th economy in the world and AAA rating
  • IT and new tech sector ca $50b
  • Australia’s “soft power” in Asia: 260,000 Asian students in Australia

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