We have released a summary of our detailed review of cybersecurity M&A and investment trends for owners of technology and consulting businesses.
demand for deal flow from cash-rich strategic buyers and private equity
raised for investments was well above long-term averages;
Cybersecurity Share Price Index rose c.44% over a two-year period, while the
NASDAQ rose by 26%; and
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
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.
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.
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.
Industry deals profiled include Orange’s
acquisition of SecureData, Point B’s acquisition of Independence Consulting and
Blackstone’s investment in Lionpoint Group.
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
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.
The following summarizes our five key predictions for business owners in 2019 as discussed in our recently released Knowledge Economy Outlook paper.
1. Economic and political uncertainties will create opportunities for agile consulting companies to develop solutions that can help mitigate the current business risks facing their clients.
In 2018, the Equiteq Knowledge
Economy Share Price Index posted its biggest decline since 2008. This mirrored
weak performance across broader market indices. After a highly volatile end to
the year, we commence 2019 with increased equity market uncertainty led by a
range of political and economic risks. Against this backdrop, consulting
business owners will need to be aware of the opportunities to position their
organizations appropriately in 2019.
Major deals profiled include DXC’s
acquisition of Luxoft, Bain Capital’s acquisition of Brillio and IBM’s reported
acquisition of T-Systems’ mainframe service business.
Equiteq advised Orbium on its sale to Accenture
and Cervello on its sale to A.T. Kearney.
The Equiteq Knowledge Economy
Share Price Index experienced rises along with broader market indices.
acquisition of Luxoft builds new digital capabilities and sector vertical
Target: Luxoft is a global
provider of technology solutions, including software development services.
Buyer: DXC Technology
is a US-headquartered global IT services firm.
Deal Value: $2bn (2.2x TTM Sep-18 revenue)
Deal Insight: DXC Technology was formed in 2016 following the merger of HPE’s spin-off of most of its enterprise services business with Computer Sciences Corporation (CSC). Since its formation, DXC has been highly acquisitive and has announced notable deals across technology and consulting, including the acquisitions of:
Tribridge and Logicalis SMC in 2017; and
System Partners, Molina Medicaid Solutions and argodesign in 2018.
DXC’s acquisition of Luxoft is a transformational
deal for the firm. It provides DXC with important capabilities in outsourced
digital engineering, cloud and devops. It also enables DXC to deepen its
capabilities for clients in the automotive and financial services sector
verticals, particularly in Europe. At the end of January, DXC also announced its
acquisition of EG A/S, a Microsoft consulting firm with a strong presence across
We have released a summary of our
detailed review of data analytics consulting M&A and investor trends for
owners of businesses across the knowledge economy.
At the core of the Fourth Industrial
Revolution is the fusion of big data, advanced analytics and new physical
technologies. The key to business success in the new digital age is no longer
being able to simply use data to measure current and past performance. It is
being able to make predictions about the future and quickly prescribe
recommended strategies that can enrich decision making.
From a delivery model perspective, there is pressure on knowledge-intensive services firms to enhance their consulting 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 in 2018, we found that buyers focused on acquisition targets with proprietary platforms, leverageable IP and managed services solutions.
Major deals profiled include Cognizant’s acquisition of Mustache,
PA Consulting’ acquisition of We Are Friday and Accenture’s acquisition of
Equiteq advised LightStream Analytics on its sale to ABeam
The Equiteq Knowledge Economy Share Price Index declined
along with broader market indices.
Cognizant acquires creative
agency Mustache after another strong year of deal flow for the prolific buyer.
Target: Mustache is a US-based content creation agency that
provides video production and marketing services with a focus on developing
integrated advertising campaigns for blue-chip clients.
Buyer: Cognizant is a US-headquartered global technology
Deal Insight: Cognizant stepped up its deal flow across digital capabilities following a lull in activity in 2015. In its debut appearance, Cognizant Interactive was named among the top of Ad Age’s Agency Report 2018 rankings. The acquisition of Mustache adds strong content specialist capabilities and develops Cognizant Interactive’s digital content services to better position it against competitors like Accenture Interactive and Deloitte Digital. The transaction builds on Cognizant’s acquisition of Softvision for $550m in October. Softvision is a provider of end-to-end digital products and solutions with experience in developing video-streaming platforms.