July 2017: Consulting M&A Update

By Ramone Param, Associate Director, Equiteq

DXC Technology acquires Microsoft Dynamics 365 specialist Tribridge

DXC Technology made its first acquisition after forming in April following the merger of CSC and the Enterprise Services unit of Hewlett Packard Enterprise. The technology giant acquired 740-person Microsoft Dynamics 365 consulting firm Tribridge and its managed cloud business Concerto Cloud Services.  The deal is expected to enhance the buyer’s consulting offerings focused on clients in health care, government, consumer packaged goods, and professional services.

Tribridge is one of the largest independent integrators of Microsoft Dynamics 365 and is a six-time winner of Dynamics 365 Worldwide and U.S. Partner of the Year. Tribridge will become part of DXC Eclipse, an IT application consulting business acquired by the business in October 2015 for c.$300m.

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June 2017: Consulting M&A Update

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By Ramone Param, Associate Director, Equiteq

Accenture acquires Salesforce specialist Phase One

Accenture agreed to acquire Phase One Consulting Group, a Virginia-based digital transformation specialist for the federal market with strong capabilities in Salesforce cloud solutions. Phase One will join Accenture Federal Services upon completion of the deal.

Phase One offers secure cloud implementation and consulting services to federal agencies for projects across various government sectors. The business had backing from RLJ Equity Partners, who acquired Phase One in early 2015. The company also received an undisclosed amount of development capital from Salesforce Ventures in September of last year.

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Should I sell my consulting firm to an overseas buyer?

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By Gabriela Silvestris, Director, Equiteq

Overseas buyers can be an important target audience when looking to sell your consulting firm. Equiteq considers international acquirers for every M&A client and a large proportion of the businesses we have sold have been bought by overseas buyers.

Acquiring in desirable regions allows strategic buyers to gain quick access to lucrative markets, brands, intellectual property, local market knowledge, new clients and specific local expertise. As a result of this, overseas buyers may pay a premium to gain a market foothold.

To attract overseas buyers, it is important to demonstrate the attractiveness of local markets, market positioning and why the acquisition will be less risky and deliver a faster return than opening an office and recruiting local talent. To learn more about global buyer demands download our latest Buyers Research Report here.

M&A transactions need careful handling and cross-border M&A deals bring an array of additional challenges.

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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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What do you do when a buyer approaches you unsolicitedly?

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It is not uncommon for thriving consultancies to be approached by a potential acquirer. However, many business owners fail to prepare for such an eventuality. This often leads to one of three outcomes, a bad deal for you, a mediocre deal, or a lengthy distraction over many months leading to nothing. These outcomes occur when savvy buyer meets first time seller, and only one buyer provides no leverage to the owner in carving out the best terms.

A company sale process is always time-consuming, stressful and emotional. There is a wide array of skills required that go way beyond your undoubted ability to sell high value, complex services to C level in top Fortune or FTSE companies. There are deal process skills that accelerate stages and conclusions while gaining maximum leverage, financial and synergy modelling skills that multiply value, and cool head skills that defend value and save a deal from collapse. Attempting to navigate this without expert support and while running your own business at the same time is usually false economy with high stakes.

Here are reasons why you should define your exit goals well ahead of a transaction.

How to approach your initial meeting

Prior to sitting down to discuss a possible deal with any buyer, there are a number of things and risks to consider before you start sharing information.

  • Who are you dealing with?:

It is vital to know the company you may be selling your business to. Immediately, find out if they have previous experience acquiring consultancies; how deep their pockets are likely to be; whether there is a possibility of cash up front in a deal. These are just some of the things that’ll help you know where you stand in a negotiation.

  • Seriousness of intent:

To avoid wasting your time, establish whether or not you are dealing with the decision-makers. So ascertain early on what their mandate and decision process is. You don’t want a situation where you have spent 6 or 8 months negotiating only to find that the CEO, whom you’ve never met, doesn’t like the asking price.

  • Competitive consequences:

If a deal falls through, consider what happens to all of the client details, strategy and financial information you’ve shared with the potential buyer. Think about how they may use this information if they go on to acquire a similar business. No matter the relationship you may have with an unsolicited buyer, get a non-disclosure agreement signed and DO NOT release any substantive information at the first meeting.

 

What you need to find out at the first serious exploratory meeting

Following your research, if there are any gaps in your knowledge of the above, they should be discussed in your first meeting with them, which should also cover the areas below.

  • What is their strategy and how do you fit in?

From the onset, request clarification on the strength of the company and the broad growth strategy of the firm you are about to join. It is important to determine where acquisitions fit in their strategy and the synergy value of your organization to the buyer.

  • Establish your criteria for a deal

Here, you’d want to know what type of deal the buyer is prepared to offer you for your business and where that fits with your financial and non-financial objectives. For instance, there is no point in continuing discussions if the buyer is unable to offer you a deal superior financially than the alternative of continuing to grow the business and equity value.

Also, many business owners have other non-financial objectives, such as how you and your staff will be integrated into the new entity. There have been instances where owners, used to entrepreneurial control,  have failed to integrate, preferring to walk away and relinquishing part or all of their earn out.

Unsolicited approaches are usually an exciting time for a business, but it is important to remember that there is also a lot at stake if you get it wrong. Don’t take the risk. Speak to an expert at Equiteq.

Click here for more tips on how to defend value in an unsolicited acquisition

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