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.

American Securities and Lindsay Goldberg acquires AECOM’s Management Services business, creating a new standalone contractor serving the government sector.

Target: AECOM’s Management Services business is a contractor to the U.S. federal government and serves various departments and agencies. The business is part of US-headquartered multinational engineering firm AECOM.

Buyers: American Securities and Lindsay Goldberg are US-headquartered private equity firms.

Deal insight: AECOM’s divestment of its Management Services business follows reports in June that AECOM was intending to spin-out the division. AECOM is exiting the business as part of a strategic initiative to maximize shareholder value through cost reductions and by selling non-core assets. The exit already follows the sale of its Canadian industrial services business and its Irish design build offering over the last two years. 

American Securities and Lindsay Goldberg have significant capital available for investment. Furthermore, Lindsay Goldberg has experience of realizing two investments in the government services space. In 2016, Lindsay Goldberg exited their investment in PAE to Platinum Equity. PAE offers support for essential missions to the US government. In 2018, the investor also sold US-based government services player ECS Federal to strategic buyer ASGN.

There is notable consolidation among government services players in the US. In January, SAIC merged with Engility to create the second-largest independent technology player in government services with over 23,000 employees. Last year’s sale of PwC’s government consulting business to Veritas Capital was followed by a rebranding of the business to “Guidehouse” over Summer. This was followed by the firm’s $1.1bn acquisition of Navigant Consulting in October. Investment in the space is being driven by increased government spending in the region, particularly as it relates to technology-focused defense spending. This is resulting in contractors vying to build more scale and adjacent capabilities to enable them to bid on larger projects.

Boston Consulting Group acquires AllofUS as it expands its design capabilities in the UK.

Target: AllofUs is a UK-based design consultancy.

Buyer: Boston Consulting Group is a US-headquartered strategy consulting firm.

Deal insight: Boston Consulting Group, along with the traditional strategy consulting firms that it historically competed with, is increasing their deal flow in the digital consulting space. AllofUs marks BCG’s third acquisition this year, following its purchase of Kernel Analytics and The Simulation Group. The buyer is also investing in early stage venture capital and organically in its digital-focused business units:

  • BCG Digital Ventures, its digital innovation, incubation, and investment unit;
  • BCG Platinion, its IT architecture and solutions business; and
  • BCG Gamma, its advanced analytics and data science services arm.

The acquisition of AllofUs is set to strength BCG’s design and engineering capabilities that forms a key part of many of its clients’ digital innovation projects. The Fourth Industrial Revolution is being shaped by accelerating innovation, which is driving the fusion of advanced digital technologies to enable many of the latest industry transformations. This presents new opportunities for disruptive consulting firms across industries and is driving buyer demand for the latest innovation strategy capabilities from buyers across industries.

BCG will have been attracted by AllofUs’ roster of blue-chip clients, which include the likes of Samsung, Google and Facebook. The purchase of the AllofUs builds on BCG’s 2017 acquisition of MAYA, a Pittsburgh-based digital design and innovation lab.

Selected Knowledge Economy M&A announced in October:

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

Knowledge Economy Share Price Index

Source: S&P Capital IQ

Note: The Equiteq Knowledge Economy Share Price Index is the average of Equiteq’s five segmental indices and is the only published share price index which tracks the listed companies within the knowledge economy. The index is continually revised to consider new listed companies and to remove businesses that are no longer relevant in each quarter.

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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.

Accenture continues to build its advanced analytics capabilities with the purchase of Pragsis Bidoop.

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

Target: Pragsis Bidoop is a Spain-headquartered big data, AI and advanced analytics company.

Deal insight: As part of the transaction, Accenture will add over 200 people with machine learning and big data engineering experience to the buyer’s applied intelligence business. The business was recently bolstered by Accenture’s acquisition of Analytics8 last month. Analytics8 was an Australian business specialized in data management, visualization, data science and analytics services. Accenture’s acquisitions of Pragsis Bidoop and Analytics8 highlight the continued demand for advanced analytics consulting capabilities among strategic buyers that are shaping the digital age.

There is pressure on many consulting firms to enhance their offering with new data analytics solutions. This same pressure is being felt by consulting firms’ clients, who look to their advisers for assistance in innovating and realizing competitive advantages from new data analytics tools. Across the space, we observe buyers being focused on acquisition targets with proprietary platforms, leverageable IP and managed services solutions.

Siemens Healthineers acquires ECG Management Consultants from private equity Gryphon Investors.

Buyer: Siemens Healthineers is a US-headquartered medical technology company.

Target: ECG Management Consultants is a US-headquartered provides specialized strategic, operational, financial, and technology-related consulting services to health systems, hospitals, medical groups and academic medical centers.

Deal insight: Siemens AG launched an IPO of Siemens Healthineers in March last year. The floatation was one of the biggest IPOs in Germany in 2018, as well as one of the largest in the medtech industry worldwide. The acquisition of ECG Management Consultants follows the buyer’s landmark purchase of medtech business Corindus Vascular Robotics for $1.1bn. These deals forms part of the buyer’s strategy 2025, which was outlined last year to bolster its market leadership.

Gryphon Investors acquired ECG in 2014 and has since grown the business with the purchases of NeuStrategy, Eveia Health Consulting and Kurt Salmon’s healthcare business. A confluence of demographic, economic, regulatory and technological drivers are forcing healthcare providers to improve care standards and enable efficiencies. Consulting firms are benefiting from this trend and are seeing further potential from helping clients realize new competitive advantages that will arise from using rapidly evolving technologies. This includes the latest connected devices embedded with the latest artificial intelligence and advanced data analytics solutions.

Selected Knowledge Economy M&A announced in September:

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

Knowledge Economy Share Price Index

Source: S&P Capital IQ

Note: The Equiteq Knowledge Economy Share Price Index is the average of Equiteq’s five segmental indices and is the only published share price index which tracks the listed companies within the knowledge economy. The index is continually revised to consider new listed companies and to remove businesses that are no longer relevant in each quarter.

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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.

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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