Sales Performance and Enablement Industry Bulletin

Equiteq reviewed M&A and investment trends in the growing sales performance and enablement industry.

Digital transformation initiatives continue to be an overarching theme with large enterprises looking to leverage data and technology to drive consumer engagement and sales. Sales performance and enablement sits at the intersection of training, management consulting and sales effectiveness. This mission critical function increasingly matters to overall business strategy and outcomes.

Clients are changing how they engage with sales improvement systems and how they spend related budgets. Equiteq expects these trends to continue with training organizations pursuing M&A as a means to ensure they have the necessary digital and data analytic capabilities to revitalize growth and support their client needs. While on the face of it, increased competition for deals should facilitate sales processes and more lucrative outcomes, preparation and timing remain critical.

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January 2020: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include NTT Data Services’ acquisition of Flux7, Accenture’s purchase of Clarity Insights and Atos’ acquisition of Maven Wave.
  • The Equiteq Knowledge Economy Share Price Index rose over the month.

NTT Data Services acquires Flux7, bolstering its AWS consulting capabilities.

Target: Flux7 is a US-headquartered company specialized in cloud implementation and migration, automation and DevOps consulting services.

Buyer: NTT Data Services is a US-headquartered provider of IT insights and solutions.

Deal insight: The acquisition of Flux7 forms part of three acquisitions announced by NTT Data Services in 2019. The buyer is bolstering its IT consulting capabilities across North America and the purchase of Flux7 adds consulting capabilities in the rapidly growing AWS’ public cloud. The deal also strengthens NTT Data Services’ capabilities in application modernization, a space in which it was named a leader in the Q3 2019 Forrester Wave for Application Modernization and Migration Services.

In April, Flux7 raised funding from NewWave Partners to invest in the expansion of its DevOps consulting services. Its acquisition by NTT Data Services will give Flux7 access to NTT’s global R&D capabilities and infrastructure. The deal will also enable Flux7 to offer its clients a broader set of digital transformation and innovation capabilities from an established global platform.

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November 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include Tech Mahindra’s acquisition of BORN, DXC Technology’s purchase of Virtual Clarity and Accenture’s acquisition of Silveo.
  • Equiteq advised on five completed transactions over the month.
  • The Equiteq Knowledge Economy Share Price Index rose over the month.

Tech Mahindra continues its North American acquisition spree with its purchase of digital agency BORN.

Target: BORN Group is a US-headquartered digital contentand productionagency.

Buyer: Tech Mahindra is an India-headquartered provider of IT services and consulting.

Deal value: $95m

Deal insight: Tech Mahindra continues to build its North American digital capabilities with a string of acquisitions. Its purchase of BORN follows the Indian outsourcer’s acquisition of US-based design agency Mad*Pow in July and the purchase of Canadian IT consulting firm Objectwise Consulting in June. Tech Mahindra also recently invested in US-based software development company Altiostar. This significant deal flow from Tech Mahindra over 2019 reflects a notable uptick in activity as compared with the last five years.

The acquisitions of North American digital capabilities by Tech Mahindra reflects a shift for traditional IT outsourcing giants. Most are pivoting their service offering away from their shrinking legacy outsourcing core market and toward the growing digital and innovation consulting sectors. Major outsourcing players are using a blend of organic growth initiatives, early stage investments, and M&A to enable this. Some of the most active traditional outsourcing firms that are purchasing businesses in the digital and innovation space include Accenture, Cognizant and Capgemini, as well as other Indian outsourcing giants like Infosys and Wipro.

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October 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include American Securities and Lindsay Goldberg’s acquisition of AECOM’s Management Services business, BCG’s purchase of AllofUs and Thoma Bravo’s acquisition of Sophos.
  • Equiteq advised Presence of IT on its sale to Deloitte and Mitrais on its sale to CAC Holdings.
  • The Equiteq Knowledge Economy Share Price Index rose modestly over the month.

Thoma Bravo makes offer to acquire next generation cloud-enabled cybersecurity solutions provider.

Target: Sophos is a UK-headquartered specialist in advanced cloud-enabled cybersecurity solutions.

Buyers: Thoma Bravo is a US-headquartered private equity firm.

Deal value: £3.1bn ($3.9bn) (5.5x TTM 31-March-2019 revenue)

Deal insight:  Thoma Bravo will be acquiring a cyber security provider that has positioned itself as an innovator in the market by leveraging advanced capabilities in artificial intelligence, cloud, data analytics and managed threat response. The global cybersecurity market is expected to grow rapidly over the coming years. Accelerating digital transformation of businesses across industries has opened new vulnerabilities with the continued shift to new cloud-based systems, as well as the rising adoption of mobile devices, social media platforms and advanced data analytics tools. In addition to these industry drivers, robust capital raises and dry powder are supporting strong demand from private equity firms bidding on the potential for stellar returns in the space.

Thoma Bravo is an investor that has experience of investing in major assets in the cyber security space. The private equity buyer previously acquired Imperva, a provider of cybersecurity solutions to protect systems on-premise and in the cloud, in a deal which was valued at $2.1bn. The investment firm also acquired Veracode, a provider of next-generation application security testing, which was purchased from Broadcom for $950m. We have also noted major recent cyber security deals from Thoma Bravo’s competitors including Blackstone and KKR, who exited their investment in Cylance to BlackBerry last year.

Sophos is listed on the London Stock Exchange and Thoma Bravo’s proposed offer price of $7.40 pence per share in cash represents a 37.1% premium to the closing price of Sophos shares on 11 October 2019. The acquisition of Sophos is being denominated in dollars against a backdrop of continued forex volatility in the UK through Brexit negotiations. This presents significant foreign exchange risks to investors that are being paid in sterling.

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September 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include McKinsey’s acquisition of Westney Consulting, Accenture’s purchase of Pragsis Bidoop and Siemens Healthineers’ acquisition of ECG Management Consultants.
  • Equiteq advised Live Rice Index on its sale to S&P Global Platts.
  • The Equiteq Knowledge Economy Share Price Index was broadly flat over the month.

McKinsey strengthens its capital-projects consulting capabilities with acquisition of Westney Consulting.

Buyer: McKinsey is a US-headquartered global management consulting firm serving businesses, governments, and institutions.

Target: Westney Consulting is a US-headquartered capital projects consulting firm.

Deal insight: The acquisition of Westney further strengthens McKinsey’s industry recognized capital projects and infrastructure consulting business. Westney has strong capabilities in energy consulting, enabled by rich data sets. These capabilities have benefited from stabilizing commodity prices, increased infrastructure spend in the US and the rising complexity of new large infrastructure projects.

McKinsey has historically focused on organic growth, while making selective acquisitions in strategically important spaces. Strategic sectors have included digital consulting and data analytics, which are also market segments with acute talent shortages. McKinsey’s acquisitions are typically preceded by a partnership with a target company, which can enable the testing of synergies before agreeing a deal. McKinsey and Westney note a longstanding partnership, where they have worked together on various projects for over 10 years prior to agreeing this transaction.

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August 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include Guidehouse’s acquisition of Navigant Consulting, BC Partners’ purchase of Presidio and Accenture’s acquisition of Parker Fitzgerald.
  • The Equiteq Knowledge Economy Share Price Index declined over the month in line with broader equity markets.

Veritas Capital-backed Guidehouse acquires Navigant Consulting in a landmark management consulting transaction.

Target: Navigant Consulting is a US-headquartered global professional services firm that was listed on the NYSE.

Buyer: Guidehouse is a US-headquartered provider of management consulting services to government clients. Guidehouse formed following Veritas Capital’s acquisition of PwC’s public sector advisory business last year.

Deal value: $1.1bn (1.4x TTM Jun-2019 revenue)

Deal insight: 

The acquisition of Navigant will create a major management consulting player with deep industry expertise. Guidehouse has worked on high-profile lucrative engagements with government agencies such as the department of defense, homeland security and veterans affairs. These government-focused advisory capabilities will be merged with Navigant’s strengths in consulting to the healthcare, energy and financial services sectors.

The sale of PwC’s government consulting business to Veritas Capital was followed by a rebranding of the business to “Guidehouse” last Summer. The divestiture is expected to allow PwC to focus on the growth of other parts of its advisory business and to enable it to pursue more business in auditing government agencies. This audit business was being limited due to professional standards which cap consulting services that audit firms can provide to these agencies.

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July 2019: Knowledge Economy M&A and Equity Market Update

  • Major deals profiled include Bain Capital’s acquisition of Kantar, Tech Mahindra’s acquisition of Mad*Pow and PA Consulting’s purchase of 4iNNO.
  • Equiteq advised WGroup on its sale to Wavestone and RevUnit on its investment from Mountaingate Capital.
  • The Equiteq Knowledge Economy Share Price Index dipped slightly over the month.

WPP sells research and analytics business Kantar to Bain Capital.

Target: Kantar is a UK-headquartered research, data and insights business that was owned by global marketing network WPP.

Buyer: Bain Capital is a US-headquartered multi-asset alternative investment firm.

Deal value: $3.1bn (1.5x TTM Dec-2018 revenue)

Deal insight: In June, The Drum reported that WPP was in the process of selling Kantar. It was noted that Vista Equity Partners, Apollo, Platinum, as well as Bain, were four US private equity’s bidding for the research unit. The private equity focused process exemplifies a broader trend of strong demand for major knowledge-intensive services businesses from cash-rich financial buyers that are supported by robust fresh fundraisings. Kantar’s investment from Bain Capital follows the financial buyer’s acquisition of digital consulting firm Brillio in January.

WPP is undertaking a crucial transformation of its business following the resignation of Sir Martin Sorrell last year and Mark Read’s appointment as the marketing network’s new CEO. WPP recently sold its stake in Globant to pay down debt and announced internal mergers of agencies to create a more comprehensive digital-focused offerings for its clients. This is part of a three-year plan of “radical evolution” that was outlined by Read to improve WPP’s business performance. This is aimed at better positioning WPP for growth by countering new competition from innovative non-traditional media competitors from the consulting and technology sectors.

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Digital Agencies M&A and Industry Bulletin

By Ramone Param, Director, Equiteq

We have released a summary of our detailed review of digital agencies M&A and investment trends.

Equiteq is pleased to present the results of our review of M&A and equity market trends across the digital agency space. Digital agency M&A activity was strong in the first of half 2019 (H1 2019) as cash-rich buyers continued to acquire new capabilities in a tight talent market. Deal activity has been strong over the last five years as buyers continue to build new capabilities via M&A. In H1 2019, deal activity was broadly in line with H1 2018. M&A is concentrated on North America and Europe with a growing market emerging in the Asia Pacific.

M&A Deal Volumes FY 2010 to H1 2019

Note: Dotted line indicates deals in first half of the respective year.
Source: Equiteq Market Intelligence, S&P Capital IQ

There is considerable activity from non-traditional media agency buyers from the consulting and technology sector. This is putting pressure on the “Big Six” media networks – Dentsu, Havas, Interpublic Group (IPG), Omnicom, Publicis and WPP. These major marketing networks have also experienced declines in their share price over the past couple of years, driving reorganizations and new M&A.

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June 2019: Knowledge Economy M&A and Equity Market Update

By Ramone Param, Director, Equiteq

Major deals profiled include Capgemini’s acquisition of Altran, Tieto’s acquisition of EVRY and CVC’s acquisition of Teneo.
The Equiteq Knowledge Economy Share Price Index rose over the month.

Capgemini and Altran create a global digital transformation leader with strong ER&D capabilities.

Target: Altran is a France-headquartered provider of engineering and R&D services.

Buyer: Capgemini is a France-headquartered global provider of consulting, IT services and digital transformation.

Deal value: €3.6bn (1.2x TTM Dec-2018 revenue)

Deal insight:
The purchase of Altran will enable Capgemini to take a leading position as a service provider focused on engineering, research and development (ER&D) as part of the digital transformation of industrial and tech companies. The acquisition is a milestone transaction for Capgemini that builds on previous deal flow in areas like digital media, cyber security and financial services consulting. This includes the purchase last year of digital consulting firm LiquidHub, which was acquired for €400m from ChrysCapital. The buyer followed this acquisition with the launch of Capgemini Invent, which combined Capgemini Consulting and expertise in technology and data science. The new brand comprised LiquidHub, innovation consulting firm Fahrenheit 212, as well as creative design agencies Idean, Adaptive Lab and Backelite. The acquisition of Altran, along with these recent acquisitions and restructurings, better positions Capgemini against growing digital transformation competitors like Accenture, Cognizant and the Indian IT services players.

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May 2019: Knowledge Economy M&A and Equity Market Update

By Ramone Param, Director, Equiteq

  • Major deals profiled include Orange’s acquisition of SecureLink, Perficient’s acquisition of Sundog Interactive and Tetra Tech’s purchase of WYG.
  • The Equiteq Knowledge Economy Share Price Index dipped slightly over the month.

Orange deepens its cybersecurity capabilities in Europe.

Target: SecureLink is a Netherlands-headquartered provider of security consulting, security maintenance and support, as well as advanced managed detection and response capabilities.

Buyer: Orange is a France-headquartered provider of a range of telecommunications, data transmission and related services.

Enterprise value: €515m (2.1x FY 2018 revenue)

Deal insight:  Orange accelerates its growth in the European cybersecurity market with its acquisition of SecureLink, one of the largest independent services players in the region. Demand for cybersecurity solutions is growing as technology plays a greater role in critical business functions across industries. According to data from ResearchAndMarkets.com, Europe’s cybersecurity market is anticipated to grow at a CAGR of 11.3% and will be worth $47.2bn by 2023.

The purchase of SecureLink follows Orange’s acquisition of UK-based cybersecurity specialist SecureData, which was purchased at the beginning of the year. These deals, along with the acquisition of Business & Decision, form part of Orange’s strategy to become a global player in digital transformation and data services.

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