Robust demand for M&A by corporates and private equity, and strong share price performance in the fourth quarter.

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By  Ramone Param, Associate Director – Market Insights & Buyer Coverage, Equiteq

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Global M&A activity across the Knowledge-Intensive Services sector, as tracked by the Equiteq Consulting M&A Index, remained strong in the final quarter of 2016. Deal volumes were broadly flat in comparison to a robust prior quarter and rose in comparison to the same quarter last year. The conclusion of the U.S. presidential race has been followed by sharp rises in investor confidence and the Equiteq Consulting Share Price Index has rallied strongly throughout most of November and December, outperforming both the S&P 500 and FTSE 100. The overall Equiteq Consulting Share Price Index is now rallying at an all-time high.

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As we anticipated, deal activity in the last quarter remained buoyant in the IT services sector. Appirio, was acquired by Wipro for $500m, positioning the buyer as the leading Indian technology services player in the cloud consulting space. Appirio was considered a prized acquisition opportunity amongst a range of potential suitors after a wave of deals left Appirio as one of the largest independent cloud consulting specialists remaining in the market.

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Brexit U.K. Market Update

Consulting buyers report “business as usual” with respect to acquisitions in the U.K. and Equiteq’s Consulting Share Price Index continues to rally beyond pre-Brexit levels, supported by the release of a string of robust economic data.Brexit Blog Cropped

Two months on from the U.K.’s vote to leave the E.U. and the vast majority of the U.K. and overseas consulting buyers that we are in regular discussion with report that it is business as usual as it relates to their strategy for acquisitions. Robust investor confidence in the consulting and IT services sector is also evident from the continued rally of the Equiteq Consulting Share Price Index beyond the levels reached pre-referendum, with some consulting sub-segments touching record highs. This positive sentiment is supported by the strong U.K. and European economic data that has been released over the past two weeks.
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As we discussed in our last quarterly update, the initial period following the U.K. referendum was marked by a spike in volatility, particularly as it relates to the trading of equities and currencies. This week it was announced that U.K. manufacturing exports are at their highest level in two years and a Eurozone economic sentiment indicator published by the European Commission rose in July. This market data is painting a more optimistic picture of post-Brexit economic conditions, particularly when combined with the surge in U.K. retail sales and the fall in the U.K. unemployment claimant count, which were both announced this month. These recent economic figures contradict some of the early indications that consumer and investor confidence was falling in July.

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