What to expect from Corporate buyers

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Previously we provided an overview of the three broad categories of consulting firm acquirers – consulting, corporate and investment – and their key acquisition drivers. We then did a deep dive into what to expect from consulting firm buyers and now turn our attention to corporate buyers.

There are big differences between a company that makes most of its revenue from selling products or services and a consulting firm that sells advice. Consulting firms have a different business model, few to no tangible assets (as their people are their assets) and are often much smaller in scale compared to most corporate buyers.

Despite this, there are many examples of corporate buyers paying above market value for acquisitions of consulting firms. So what drives these types of acquisitions?

In practice, the drivers of corporate acquisitions of consulting firms tend to be specific to the sector and particular situation of the acquirer. However, when the differences between corporate and consulting firms are complementary, this can generate large synergy opportunities for corporate buyers to unlock additional future value. We’ll look at two common drivers of consulting firm acquisitions among corporate buyers in turn.

1. Acquiring up the value chain to drive additional down-stream revenue

It is not uncommon for consulting engagements to lead to a large body of work involving change and transformation within the consulting firm’s client. A consulting engagement dealing with changes to the strategic direction or operating model of a company will often result in a long tail of activity to implement and embed the change, as well as involving changes to the key partners or suppliers of the client.

For a corporate service provider, consulting capabilities that provide earlier engagement in a lifecycle of change may direct more revenues their way and also better control the type of service they inherit. As such for some corporate firms, the acquisition of a consulting firm whose work typically precedes the sale of their own offerings may be very attractive as an acquisition target to drive additional revenues.

In our experience, the ability to capture additional core revenue by adding a consulting or advisory capability tends to be a common driver for corporate buyers acquiring consulting firms. When considering corporate buyers, sellers of consulting firms should look across the lifecycle of their engagements and beyond their scope of work to consider the synergies they may offer corporate buyers.

2. Acquiring internal advisory capabilities to enhance the existing business

All companies operate in competition with changing market dynamics. Those that excel have a laser-like focus on improving their offerings in order to retain a competitive advantage. For this reason, many large companies have internal consulting divisions used to improve internal operations and external offerings, but also look to external consultants for specific areas of expertise.

By acquiring the right specialist consulting capabilities, the corporate buyer benefits from a long-term advantage that further enhances the value of their offerings, internalizes this supporting capability and prevents their competition from gaining that particular area of expertise.

Corporate buyers are constantly assessing acquisition opportunities that directly add to their top line. Conversely, the acquisition of a consulting firm that indirectly enhances its core offerings and improves internal efficiencies has an indirect impact. This can make it difficult for a corporate buyer to justify a consulting firm acquisition if the only reason is to gain internal consulting capabilities.

Sellers of consulting firms should think carefully about this type of acquisition. Buyers that pay premium deal values often do so because the seller provides significant immediate and future value to them that only the buyer can realize, above the standalone value of the target. The value premium is therefore often the result of a small proportion of future synergy value being ‘pre-paid’ by the buyer in the purchase priced to beat the competition. However, future synergies are more often driven by direct revenue synergies (cross selling, on selling, etc.) than the indirect revenue synergies (enhanced existing capabilities) described here. As such, an acquisition offer from a corporate buyer to gain an internal capability may not necessarily be the best offer in the market. So the best offer from a corporate buyer is likely to come from one who is both acquiring up the value chain and also gains from internal advisory capabilities.

In the fourth and final part in this series we shall be looking at investment buyers. If you’d like to see the full-length article this blog is based on please click here.

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Demand for acquisitions in the consulting sector? What buyers say.

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We’re pleased to bring you the results of our second annual Buyers Research. We commissioned an independent researcher to speak to over 100 consulting firm buyers across North America and Europe. The results provide valuable intelligence for both consulting firm owners with an eye on selling their firms at some point in the future, and consulting firm acquirers wishing to understand buying trends in the current market.

The research found that buyers’ acquisition expectations have more than doubled in the past year and there are huge amounts of capital set aside to enable these acquisitions. Within those spoken to for the research, there are over $7.7bn of funds available for the acquisition of over 400 firms in the next two to three years. This is an 11% increase from last year’s budgets and is encouraging given the continuing economic uncertainty we have seen over the past year.

When it comes to the size of consultancies most in demand, buyers are looking for larger firms than they were last year. On average the target acquisition size for the next two to three years ranges between $18m and $45m in revenues, with an optimum size of $31m. This reflects a 20% increase in size preference at the lower end and a 15% increase at the upper end. However, if you’re looking to sell your firm, it is important to recognize that the vast majority of consulting sector deals are consistently done at the smaller end of the market. Because of this, knowing the right buyers to approach can make the difference between success and failure when selling your firm.

Buyers are polarized in their use of qualitative and quantitative measures when evaluating acquisition opportunities in consulting. Quantitatively, buyers prioritize margins and growth above all other metrics. Qualitatively, buyers focus in on your client base and quality of your intellectual property (IP). A deep understanding of what buyers are looking for will allow you to tailor your approach accordingly.

IP continues to be of paramount importance for buyers, as 68% of all buyers cited IP as being extremely or very important as a factor when assessing potential acquisition targets. When considering the different types of IP, buyers prefer IP that directly generates revenue, or that supports the delivery or standardization of a target firm’s consulting services. While IP plays a key role in buyers’ consideration of consulting firms, consulting firm owners need to draw a clear line between their IP and the real value it creates for the firm.  Forty-five per cent of all buyers found it difficult to understand how the IP in the target firm contributes to the success of those. If you’d like to learn more about this, please view our webinar on how to build IP which will grab a buyers’ attention here.

Earn-outs continue to be a reality for the majority of consulting sector transactions. The ‘average’ deal will include 45% in up-front cash, with the rest over a period of 2.7 years; 83% of buyers measure earn out performance on gross margin, but measures range from partner retention to net profit performance. There is a wide range of ways that deals can be structured and a lot at stake, so the need for good negotiation skills is critical to get the best deal for you and your business.

Finally, once the champagne cork is popped and the focus turns to integrating an acquired consulting firm, the survey found that buyers tend most often to focus on the integration of people above all else in the first 90 days post deal. This is due to the fact that human capital is the real asset of a consulting firm. As any acquisition is a disruptive time for a seller, buyers are keen to ensure their assets don’t walk out the door during or immediately after an acquisition. Following the integration of people, clients are the next highly prioritized area and the more mechanical integration of technology and systems follows on from these. How long do integrations typically last? On average, as a seller of a consulting firm you can expect to be involved in an integration period for just under two years following an acquisition. Buyers start thinking about how a seller’s services will integrate with their own early on, although it is also critical for sellers to consider how integration into a buyer’s firm will impact the firms culture and its ability to retain the attributes that make it successful.

When selling your firm, knowledge of buyers in the market is critical. The more informed you are about buying behaviour and preferences in the market, the better equipped you will be to navigate through to a successful sale.

To read more detail about the findings from the research you can access the full report here.

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Growing equity value webinar series: Quality of fee income

In the last few weeks we’ve been running a series of free 30-minute webinars to help attendees grow the equity value in their consultancy firms. Attendees at each webinar are able to submit questions, and we’re going to be sharing and answering these questions in a series of blog posts. This week we’re looking at the questions asked during the webinar on how you can make client fee income more predictable and reduce forecast revenue risk.

  1. How will a buyer view a business with only three months of forward load (i.e. future pipeline)?

Potential buyers are likely to view consultancies with only three months of forward load as having too much risk. They’re looking for a good return from consultancies they invest in and if the sales engine and proposition of your business has only built a pipeline of three months of work they’re likely to look elsewhere.

However, buyers do understand that consultancies have a short forward load relative to many other types of organizations, and would not be put off by a forecast that goes 9-12 months into the future. This is where building a programme of work with a client can help rather than the ‘one and done’ engagement.

You can read more about how to build your consultancy’s sales engine here.

  1. What is the right balance of sub-contractors to employees?

While there isn’t a precise numerical answer to this question, it is important that, regardless of the ratio of sub-contractors your consultancy employs, the core competency of the business remains with employees, rather than contractors. Furthermore, as a general rule, employees rather than contractors should manage the key client relationships.

Businesses often make a lower margin when employing contractors. If your average margin across the board is dropping below 50% because it’s being diluted by contractors, this is a sign that you need to rebalance your use of employees to contractors.

For more information on this topic, read our blog on getting your staff balance right.

  1. Any tips on improving utilization among consultants?

From experience, we have come across consultancies where the most senior executives, including founders, are engaged in service delivery. It’s little wonder junior staff are underutilized if the seniors fail to delegate delivery work.

Consider this military imperative: delegate as much as possible to the lowest rank possible. This insight applies to consultancies too. To give senior members the confidence to delegate, it is important that consultants and other staff members are adequately trained. It is worth investing in training staff throughout all levels and across all skill sets. To guarantee that the training is relevant to the skills needed, consultancies should codify their intellectual property (IP) to ensure that it is learned and replicable for future success.

Finally, as with all of our webinars in this series, our key takeout is presented in our Start, Stop and Continue strategies. To immediately improve the quality of fees in your consultancy:

Start:             Start getting better monthly visibility of your future pipeline and matching it with capacity

Stop:             Stop trying to sell everything to everyone

Continue:     Continue to work within your existing sectors in order to grow new clients and avoid having all your eggs in too few baskets

To sign up to listen to a recording of this webinar, please click here. To see our upcoming webinars in the series, please click here.

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What to expect from consulting firm buyers

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Different buyers look for different things when acquiring consultancies. Broadly, there are three different kinds of buyers: consulting buyers, corporate buyers and investment buyers. Each will see different aspects of your business as valuable and understanding their motivations is important. This week, we’re taking an in depth look at consulting buyers and will examine corporate and investment buyers in future pieces.

There are four key areas of consideration for consulting buyers which we will explore in turn.

  1. Build vs buy: Why consulting firms choose to acquire rather than grow a capability.

Growth is always on the agenda for most large and mid-market consulting firms. It typically comes down to balancing organic and acquisitive growth. Organic growth takes time and the careful management of demand and supply in the new area. There is the potential risk that the payoff takes longer than expected or does not happen at all. The upside is that the firm is in control of its own growth and the pace is incremental. Acquisitive growth, if successful, is immediately additive. However there are well known statistics on the failures of M&As which are often the result of poor post-merger integration.

In practice, consulting buyers use a combination of organic and acquisitive growth. Sellers of consulting firms need to understand that buyers will always consider whether your business could be built internally for less money than it would cost to acquire your firm. It is worth asking yourself, “What am I actually selling?” as the buyer will be asking “What am I buying?” Therefore, you need to demonstrate that what you have is additive to them, rare in the market with valuable intellectual property (IP).

  1. Acquiring capabilities: What is the landscape of capabilities, services and expertise that consulting buyers typically consider?

Large, multi-disciplinary consultancies that are likely to acquire other firms tend to be organized by both capability and industry. The reality is that strategy firms have historically organized themselves by industry expertise and most others have done so by functional or disciplinary capabilities. The reason for this is that in order to provide sound strategic advice, strategy consultancies look holistically at business issues across functional disciplines and consider market dynamics within an industry.

The trick is to understand which consulting buyers will be more attracted by your focus areas (capability or industry) and less deterred by areas where you may be more generic. Ultimately, buyers are looking to pay fair market value for your firm, but gain above average returns from their investment. The way to do this is by making acquisitions that have a high degree of synergy potential with the existing business.

  1. Intellectual property: What is it and what value does it represent?

IP has always been a key consideration for consulting buyers, but is becoming increasingly important as the landscape changes. IP is difficult to define and even more difficult to value. So sellers often want to understand how to define IP, whether what they have developed as IP is valuable to buyers, and if so, what is it worth?

IP comes in many different forms. The most understood forms of IP are software or IT products/solutions that are directly revenue generating as a standalone asset. The most abstract forms tend to be methodologies or best practices that do not generate revenue, but better enable a consulting firm to sell their expertise in a repeatable and consistent fashion.

Ultimately, consulting buyers are looking to acquire IP that allows them to sell more, or higher value, consulting work.

  1. Post merger: What to expect from consulting buyers following an acquisition

It is well known that the main reason for most M&A failures is poor integration, including pre deal integration planning and post deal integration execution. The situation where a consulting firm is acquired by a buyer is even more sensitive to integration failure, as integrating people is both the most difficult aspect and also the key to its success.

Time and time again, the critical factor of integration has proven to be the alignment of leadership objectives and defining successful integration as accurately as possible. However, as the acquisition of consulting firms by buyers involves people based risks, such as attrition, most buyers mitigate this through a deferred payment or earn out in the deal structure, with upfront payment typically in the form of cash and shares (partnership with some consulting firms). However, there is an ongoing dilemma for most buyers – how to measure the performance of an earn-out to ensure the acquired firm continues to grow, while trying to take advantage of the synergies between the two firms that often make standalone earn-out metrics difficult to measure. Some firms get around this by using top line earn-out metrics such as revenue or gross profit, while others stick to earn-out metrics for an initial period until the growth and integration is proven, then work collectively with the target to adjust objectives and take advantage of the synergy opportunities.

Ultimately, the integration of consulting offerings and cross selling opportunities with clients commands most of the air time in integration discussions, as this is where the money is made and where the opportunity lies. However, consulting buyers more than others understand that a better than average alignment of people is required to make this happen.

Understanding the motivations of consulting buyers can help you position your business in a more attractive way. If you’d like to read more about what consultancy buyers look for please read the full article here.

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Equiteq’s Global M&A report 2015 – Who’s buying?

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For those aiming to one day sell their consultancy, who is buying is naturally of great interest. This week we’ll be delving into our Global Consulting M&A Report to see where the buyers are coming from.

In 2014, 2,274 targets were bought by 1,722 different buyers, meaning buyers in 2014 acquired, on average, 1.32 targets each. This is broadly consistent with a similar ratio of 1.29 in 2013, illustrating that the overall market is steady – neither consolidating, nor fragmenting – as the ratio of new buyers and new sellers entering the M&A market has remained consistent.

Looking at the most prolific buyers of consulting firms in 2014, the top of the list was dominated by the communications and marketing agencies. WPP, one of the world’s largest communications services group, acquired 52 companies in 2014, of which 23 were consulting businesses. They were also a leading buyer in 2013 with 22 acquisitions in the consulting sector during that year.

The second most prolific buyer was Publicis Groupe SA, who provides a range of advertising and communications services worldwide and was also the second most prolific buyer in 2013.

In third place, with 14 acquisitions in the consulting sector, is Japanese telecommunications company Nippon Telegraph and Telephone Corporation (NTT Corporation). They are a keen acquirer of IT consulting and services businesses.

The ‘Big 4’ and Grant Thornton are typically the most prolific buyers. Deloitte have had consistently high levels of acquisition activity per year, although KPMG was the most acquisitive in 2014.

Private equity (PE) is increasingly attracted to the consulting sector for investments and 2014 was a record year for PE acquisitions.

Roughly 85% of buyers are categorized as ‘trade’ or ‘strategic’, where the buyers seeks some form of synergistic benefit from the acquisition. And approximately 15% are ‘financial’ or ‘investment’ focused, buying in the consulting sector for a straight return on their capital. PE groups can be attracted to consulting businesses because they consume very little of the high profits they generate on fixed or working capital. The free cash flow that is generated in many consulting firms can be used to pay back the interest and capital on the loans that are an integral part of PE investments.

If you are selling a firm in Europe, there is a 26% chance that your buyer will be foreign, whereas in the USA it is most likely (88%) that your buyer will be internal. The number of cross-border deals in 2014 is slightly higher than 2013, increasing by 3%. Seventy-five per cent of deals done worldwide were completed by only five countries: USA, UK, Australia, France and Canada.

If you’re interested in a more detailed analysis on any of these areas, more information can be found in our full report. To download a copy you need to be a member of Equiteq Edge – registration takes only moments here.

What deters the buyers of consulting firms?

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During a sell-side process, it is natural to focus on the factors that most attract buyers and attributes that make your firm a good strategic or financial investment. However, it is also important to understand the often pessimistic perspective from the other side of the table – the buyers.

Why? Active acquirers look at hundreds of acquisition opportunities every year. The first time a potential buyer looks at your firm as an acquisition opportunity, they are likely to try to justify a quick “no” to move quickly though their pipeline of potential deals.

Our research and experience has identified the three top factors which deter buyers of consulting firms. Some of them can take years to address, so early identification is key.

1. Poor cultural fit

A poor cultural fit is most likely to deter buyers from making an acquisition. Prolific buyers (those who buy more than one firm a year) in particular recognize the wide variety of integration challenges that most acquisitions present and that stand in the way of the expected benefits.

Cultural fit is a critical factor in realizing the full synergy value of an acquisition, as this is not simply a mechanical integration task. It always involves people from different firms working together toward a common purpose. This is especially true of acquisitions in the consulting sector, where people are the bulk of the assets and in which cultural synergy is highly sensitized.

Unlike other red flags mentioned in this blog, culture is not something that should be tampered with as part of a transaction. Culture is often inherent in a firm. It is significantly influenced by a firm’s leadership and typically lies at the heart of the firm’s success or failure.

2. Diversity of service offerings

For a consulting firm, a strategy of building and maintaining a wide spectrum of services can be a strategy of responding to and profiting from a variety of client issues. However, if you are looking to sell your firm, buyers may not view this positively. From a buyer’s point of view, a broad set of services may dilute their perception of value, as they may see less focus and domain expertise in any one service area, which is an aspect that buyers are in fact most attracted to.

3. Good profits, but no growth

There are often different choices made when operating your firm for sale versus operating for growth. For instance, a growth-focused firm may have the appetite and flexibility to make investments today that consume capital and impact revenue and profits, with the expectation of payoff in improved revenue and/or profits in the future. In contrast, a firm looking to sell will want to show a historic track record of growth and, at the time of going to market, be in a steady growth state with good profit margins. This sets a historic precedent for the forecast future revenues and profits, on which buyers base a value. As such, a firm should ideally sell when prior investments have begun to pay off, as opposed to making new significant investments just before a sale that may temporarily impact revenue and/or profits. Doing this will break the track record of growth that sets the precedent for its future trajectory.

This is important as buyers effectively acquire ownership of a firm’s future profits or cash flows. However, even if a firm is profitable today, buyers will be deterred if there is no precedent for and/or planned future growth.

By identifying the areas that may deter buyers early on, you will be in a position to address these prior to any future sale process. And by addressing these key issues early on, you will maximize the chance of gaining full value should you one day want to sell your consultancy.

If you’d like to find out what deters buyers in more detail, please read the full article here. You need to be a member of Equiteq Edge, but signing up is free and takes only moments here.

Buyers’ view: Hot sectors update March 2015

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We spend a lot of time talking with buyers of consultancies and listening to their strategic growth needs. We also track several markets in consulting and monitor acquisition activity across the world. In doing so, we develop a good sense of hot spots for consultancy M&As. So as we head towards the end of the first quarter of 2015, what are the areas that buyers are the most interested in?

IT consulting

IT consulting continues to make up the largest proportion of deals in the management consulting space, as it has done for many years now. IT consulting covers a large and disparate set of firms, horizontally across technologies and vertically along a ‘value stack’ in IT. From IT strategists to system integrators, SAP to Workday consultants, business intelligence and data analytics specialists to IT transformation advisors; this space is broad and continues to evolve at a rapid pace.

The fact that IT is driving change in so many other industries, such as media/marketing (digital), telecoms, healthcare and financial services, amongst others, means that this section of the consulting market will, somewhat unsurprisingly, continue to evolve and change in line with demands from various different industries. As this happens, not only does it drive the need for increased IT services and advisory, it also begins to drive acquisition demand from the industries becoming increasingly dependent on IT.

Subsectors in this category where we are seeing particular acquisition interest include the so-called ‘SMAC’ areas (Social, Mobile, Analytics and Cloud), as well as cyber security. For IT consulting firms, these areas have become a necessary focus, given the new IT deployment models and the heightened threats that come with them. Our next sector insight will be on cloud computing and the various areas of consulting within it, so check back next week for a more detailed analysis on this area.

Engineering / environmental / energy

Engineering has long been a popular area for M&A activity and is seeing a particular demand for firms that deal with infrastructure change. As well as this, demand is also being driven by the general developments occurring in emerging markets.

Environment and energy are becoming more topical as concern about global warming moves up the business agenda and the demand, supply and price of oil continues to have significant economic and political influence. These issues mean businesses seek advisors in this space, hence the uptick in demand in this sector. There is also the constant flow of civil design and architectural firms acquired each year.

As this part of the market is constantly being replenished with new engineering consulting firms coming to market and a fair bit of consolidation across the board, in addition to a growing global population, significant environmental factors and changing energy needs, we expect engineering consulting to remain as one of our hot areas.

Media and marketing

Media and marketing has always had a strong advisory component and the move from print to digital has seen this sector transformed, particularly in the past two years. While print is still represented, the new digital channels are where all of the change and activity is happening. The amount of customer data generated – and the opportunities afforded by effective analysis and monetization of this – make consultancies in this space hot property. We are seeing particular demand for analytics, mobile and social media marketing, which as mentioned earlier is driving change in both the media and IT markets.

To ensure they remain competitive, big media firms need to have the right skills or access to customer channels. As these areas can take time to develop organically, media firms continue to look for acquisitions in these areas to quickly gain access to new skills and intellectual property. Otherwise, they will continue to see their market share eroded as innovative and agile companies take bites from their customer base.

Technology companies are also buying into this space as it is very IT reliant. Customer analytics for example is critically important for predicting future customer behavior and therefore how best to reach them. As this is mostly about analyzing data, IT plays a key role and large IT firms with these skills are increasingly important to the media sector.

These three areas have seen a lot of activity in the past couple of years and we expect them to continue to be hot in 2015. We regularly produce market intelligence reports on these and many other sectors. If you would like to find out more about what reports we have available, please contact us at info@equiteq.com.

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How serial buyers of consultancies see you

 

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In our M&A work with buyers of consulting firms, we see some clear differences in behaviours and capabilities between serial buyers and those who acquire less frequently. Our recent Buyers Research Report revealed that serial or prolific buyers, as we call them in the report, are each looking to acquire an average of 4.4 consulting firms over the next two years. Not only do they buy more, they have more money to spend. The average budget for all buyers next year is $65m but for serial buyers it is $90m. So, if you are looking to sell your consulting firm now or in the next few years, it is worth having an understanding of how serial buyers think, what they are looking for and what this might mean for your firm.

Prolific consulting firm buyers typically have their own internal M&A capabilities that focus on finding and integrating new acquisition targets. These targets are largely found through two routes:

  • A targeted search by the internal M&A team; or
  • Opportunities sent by intermediaries.

When a buyer’s internal M&A team conduct a targeted search, which they may also outsource to intermediaries, they usually have a mandate to find targets with a specific capability, sector alignment or geographic focus. Outside of a specific mandate, broad acquisition criteria aligned with the firm’s growth objectives exists. Buyers are constantly assessing acquisition opportunity profiles from intermediaries against their broad acquisition criteria, as an initial filter. These opportunity profiles are called ‘Teasers’ or ‘Blind Profiles’, as they provide key financial and qualitative information about the company, while maintaining confidentiality by excluding the name and any sensitive information about the target.

So buyers initially see you through the lens of a blind profile, much like how an employer would view a CV. How do you stand out? The following are some typical questions buyers will ask when looking at you as a ‘blind’ acquisition opportunity.

1. Are the financials sound?

Buyers often ‘calibrate’ their view by assessing whether your revenue is growing and if a good percentage of this is profit. This reflects the success of the firm in the market and how well it is managed. Serial buyers may also look at key metrics from your blind profile, such as revenue per partner or per consultant, as an indication of value. Strategic advisory typically commands higher fees than implementation services, but the number of partners or consultants will impact this metric. Whether this ratio is high or low, buyers will have a view on why that is

2. Do you have deep domain expertise?

This is difficult to fully assess from the blind profile, but typically buyers will want to know how deep your expertise runs. If you are too generic in your services and struggle to show a competitive advantage, this can turn buyers off as they will need to understand the depth or breadth you add to their existing services. By highlighting the depth of your expertise, the question changes from ‘is this useful?’ to ‘how can we use them?’.

3. Do you have unique and leveragable Intellectual Property (IP)?

Buyers will ask, “Should we spend money on acquiring this company or hire the expertise and build skills internally?”. Buyers are looking for tools and practices that help make money beyond what’s in an individual consultant’s head. So you need to be able to show what assets you have beyond your skilled people. This comes down to how you embed your IP into the fabric of your firm. Any IP you have would be highlighted on your blind profile, citing how you use this and its relative rarity (e.g. benchmarking data and capabilities, etc.). This is viewed favourably by buyers and helps to differentiate your firm as having value beyond the people in the firm.

In conclusion

Think about how you would look on a blind profile, highlighting only your: Key Financials (Revenue and EBITDA), Services, Top Clients, and Staff numbers.

Ultimately serial buyers will be looking at how they can acquire the highest value. Each buyer will measure value differently but they will all want to see growth, expertise and value beyond the people. As a business, you have to prove that you are worth acquiring through these very limited key facts.

Is now a good time to sell your consulting firm?

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Imagine you had the opportunity to sit down in front of potential buyers of your firm and ask them questions about their buying strategy, what would you ask them? That’s exactly what we went through in constructing the questionnaire for our first Equiteq buyers report. We wanted to make sure we were focusing on questions that would help you decide whether now is a good time to sell and also help you assess what expectations you should have. We even brought together chief executives of several consulting firms to ensure that our questions were right on the mark. The result is more than 100 interviews with some of the major buyers of consulting businesses in the US and Europe who provide some fresh and thought provoking insights. They help pinpoint exactly what buyers are looking for over the next two to three years, whether they’re looking to buy more or less, and what types of deal structures and earn-outs are being used.

Highlights from the research include:

  • More than a six percent growth in deals is expected over the next two to three years – heralding the first big growth rate for eight years.
  • Nearly a third of buyers said they expected their growth to come through acquisitions rather than organically and an equal number are seeing more opportunities to buy than last year.
  • The average budget over the next year for those doing two acquisitions or more is $90m and for those doing one acquisition it is $35m. Nearly one in six of the buyers surveyed have budgets in excess of $100m.

The 2014 Equiteq buyers report hopefully answers the questions you would want to ask. It will help you decide whether you’re likely to get a premium price or not. It pinpoints the problems in bringing a deal to a successful conclusion. And hopefully, it answers the question as to whether now is a good time to sell.

Read the 2014 Equiteq Buyers Research Report here.