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.

Private equity firm BC Partners acquires digital services provider Presidio.

Target: Presidio is a US-headquartered IT solutions provider focused on digital infrastructure, cloud and security solutions.

Buyer: BC Partners is a UK-headquartered international investment firm.

Deal value: $2.1bn (0.7x TTM June 2019 revenue)

Deal insight: 

Presidio has experienced strong revenue and profit growth since completing its IPO in 2017. BC Partners noted Presidio’s secular growth which is driven by IT systems and networks becoming increasingly complex. The investment firm also highlighted the opportunity for further expansion of Presidio in the fragmented digital industry.

The deal exemplifies the strong demand for notable knowledge-intensive services assets from prolific private equity investors that are supported by substantial sums of dry powder. BC Partners investment in Presidio follows Bain Capital’s acquisition of digital consulting firm Brillio in January. Many private equity investors are observing strong growth potential in the industry and opportunities to leverage the recurring revenue of technology services companies, which is creating a new avenue for returns within the space.

Accenture acquires financial services consulting firm Parker Fitzgerald.

Target: Parker Fitzgerald is a UK-headquartered strategic advisor and consulting partner to global financial institutions.

Buyer: Accenture is an Ireland-headquartered global professional services company.

Deal insight: 

The acquisition will strengthen Accenture’s risk consulting business catering to financial services clients globally. Demand for consulting services to the financial services vertical has grown with new regulatory pressures on the industry after the last financial crisis. This has been compounded by the rapid digital transformation of major financial institutions in response to new competition from fintech and challenger banks. The acquisition of Parker Fitzgerald follows Accenture’s purchase of financial services focused management and technology consulting firm Orbium earlier in the year. Accenture continues to be one of the most active buyers in the knowledge economy. The business has noted that it expects to spend $1.5bn overall on acquisitions in fiscal year 2019.

Selected Knowledge Economy M&A announced in August:

Source: PitchBook, S&P Capital IQ and company press releases


Knowledge Economy Share Price Index

Source: S&P Capital IQ


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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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The Cybersecurity Global M&A Report Q1 2019

By Ramone Param, Director, Equiteq

We have released a summary of our detailed review of cybersecurity M&A and investment trends for owners of technology and consulting businesses.

  • Strong demand for deal flow from cash-rich strategic buyers and private equity investors;
  • Capital raised for investments was well above long-term averages;
  • The Equiteq Cybersecurity Share Price Index rose c.44% over a two-year period, while the NASDAQ rose by 26%; and
  • Notable M&A deals included Blackberry’s completed $1.4bn purchase of Cylance, as well as CACI’s acquisition of LGS Innovations and Mastodon Design for $750m and $225m respectively.

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. Some new technologies such as artificial intelligence, machine learning and behavioral analytics are also being considered to protect against, identify and block cyber-attacks. However, the overall risk of cyber-threats is expected to rise with the proliferation of data.

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

By Ramone Param, Director, Equiteq

  • Industry deals profiled include Accenture’s acquisition of Droga5, S4 Capital’s acquisition of Caramel Pictures and ProgMedia, and Publicis’ purchase of Epsilon.
  • The Equiteq Knowledge Economy Share Price Index rose with broader equity market indices over the month.

Accenture’s purchase of Droga5 exemplifies the rapid transformation of the digital media competitive landscape

Target: Droga5 is a US-headquartered advertising agency with over 500 employees that has worked with a variety of blue-chip clients including Amazon and The New York Times.

Buyer: Accenture is an Ireland-headquartered global technology services firm.

Deal insight: Droga5 is the largest agency acquisition that Accenture has made to date. The deal further entrenches Accenture Interactive as a major player in the digital media space, putting pressure on the “Big Six” traditional media networks – WPP, Omnicom, Publicis, Havas, IPG and Dentsu. It will also put pressure on acquisitive growing consulting and technology firms that have already entered the space, including Capgemini, Cognizant and Deloitte Digital.

The deal forms part of another active year of deal flow for Accenture. Last year, Accenture Interactive was named the largest digital network worldwide by Advertising Age in its annual agency report for the third year running. Accenture Interactive’s major deals through 2018 included Adaptly in the US, Mackevision in Germany, Meredith Xcelerated Marketing (MXM) in the US, HO Communication in China and Altima in France.

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The Knowledge Economy Global M&A Report 2019

By Ramone Param, Director, Equiteq

We have released a summary of our detailed review of knowledge economy M&A and investor trends for owners of consulting and technology businesses.

  • 2018 was a year of strong M&A activity within an industry undergoing unprecedented change.
  • Deal volumes, average transactions sizes and median revenue valuation metrics rose.
  • Deal structures were more competitive, as observed by a rise in the upfront cash component and a shortening of the earn-out period for the average deal.
  • The Equiteq Knowledge Economy Share Price Index declined with broader equity market indices, but ended the year well above long-term averages.
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March 2019: Knowledge Economy M&A and Equity Market Update

By Ramone Param, Director, Equiteq

  • Industry deals profiled include CGI’s offer to acquire Acando, Accenture’s purchase of Enterprise System Partners and Version 1’s acquisition of TE4B.
  • The Equiteq Knowledge Economy Share Price Index was broadly flat over the month.

CGI makes recommended offer to acquire Acando to strengthen its capabilities in Northern Europe.

Target: Acando is an IT and management consulting business headquartered in Sweden.

Buyer: CGI Group is a Canada-headquartered IT services and business consulting firm.

Deal size: $459m (1.5x TTM revenue)

Deal insight:CGI is a global technology services player with a strong model of organic growth and M&A. The buyer has made numerous acquisitions over recent years that have expanded its global consulting and technology capabilities. Its most recent offer to acquire Acando will deepen its presence in Northern Europe adding over 2,100 professionals across the region. The purchase will expand the buyer’s strategic consulting, system integration and digital innovation capabilities. The deal builds on CGI’s €98m acquisition of Affecto in 2017. Affecto is a data analytics business headquartered in Finland.

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

By Ramone Param, Director, Equiteq

  • Industry deals profiled include Orange’s acquisition of SecureData, Point B’s acquisition of Independence Consulting and Blackstone’s investment in Lionpoint Group.
  • The Equiteq Knowledge Economy Share Price Index experienced rises over the month.

Orange broadens its cyber security capabilities in the UK with its acquisition of SecureData

Target: SecureData is the largest independent cyber security provider in the UK with additional operations in South Africa.

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

Deal insight:
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.

Orange acquires strong capabilities in this growing industry, particularly within cyber-criminality, security research and penetration testing. The acquisition extends Orange Cyberdefense’s existing operations in France and Belgium into the UK and South Africa. The acquisition follows Orange Business Services’ purchase of data and digital services specialist Business & Decision. These deals form part of the buyer’s strategy to become a global player in digital transformation and a leader across data services.

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