April 2017: Consulting M&A Update

By Ramone Param, Associate Director, Market Intelligence & Buyer Coverage, Equiteq.

SNC-Lavalin acquires Atkins

SNC-Lavalin is acquiring British engineering consultancy Atkins for £2.1bn ($2.6bn). The offer represented a c.35% premium to the undisturbed closing price of Atkins prior to acquisitions talks were announced. As highlighted in our January market update, CH2M had been rumored to be in discussions with Atkins about a possible merger earlier in the year.

The acquisition would boost the Canadian engineering and construction firm’s European revenue as it emerges from a self-imposed freeze on acquisitions in 2015. The deal is expected to expand SNC’s projects outside the energy industry, while oil prices continue to remain significantly below their 2014 levels.

In combination with John Wood Group’s acquisition of Amec for £2.2bn ($2.7bn) last month, the deal represents a consolidation of the UK engineering consulting market, a trend that we anticipated globally in our latest Engineering M&A Report.

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March 2017: Consulting M&A Update

 By Ramone Param, Associate Director, Market Intelligence & Buyer Coverage, Equiteq.

Oracle reportedly exploring Accenture acquisition bid

According to a report by The Register, Oracle has hired consultants to conduct due diligence research on acquiring Accenture. Accenture is a major Oracle partner, while Oracle has a material services business which operates alongside its software offering. The combination would significantly enhance both companies position in their respective markets, creating a leading provider of end-to-end digital transformation products and services.

A deal with Accenture would follow Oracle’s recent acquisition of NetSuite for $9.3bn and its acquisition of PeopleSoft in 2005 for $10.3bn. With Accenture’s market cap at over $77bn, the deal would be by far its largest acquisition to date.

Oracle has been focusing on its cloud business, but is still considered to be behind market leaders Amazon Web Services, as well as Microsoft, Google and IBM. Following reports of the deal, Accenture’s stock fell, with some equity analysts raising concerns about the deal’s implications for Accenture’s independence and the risks to Accenture’s strong relationships with Oracle’s competitors like SAP, Salesforce, ServiceNow and Workday.

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January 2017: Consulting Market Update

Consulting M&A Activity and Equiteq Consulting Share Price Index Performance

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By Ramone Param, Associate Director, Market Intelligence & Buyer Coverage, Equiteq.

The New Year commenced with some notable deal activity and M&A news across all five of the consulting segments that we track. The share prices of many listed consultants that form part of our Equiteq Consulting Share Price Index also rose on the back of strong market sentiment and earnings announcements.

WS Atkins and CH2M $4bn merger talks

The Times reported that British engineering and design consulting firm, WS Atkins Plc (ATKW.L) and US-based CH2M are in merger talks. Atkins had said last year that plans by the new U.S. administration and U.K. government to increase infrastructure spending would benefit the company. Atkins had been using M&A to selectively increase its geographic footprint and capabilities, in a segment that is considered to be consolidating as players look to reduce overheads and increase global market share.

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How to handle an approach from a buyer – ‘Bid-defence’

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By Bruce Ramsay, Managing Director, Business Development, Equiteq

It is quite common for successful consulting firms to be approached by prospective buyers. In fact, our data suggests that a third of the deals we process come about from buyers approaching the client.

During a recent webinar, Equiteq Managing Director Bruce Ramsay answered questions from attendees on the subject of how to handle an approach from a buyer and what to do to maximize the opportunity from such an approach.

1. Will my business be worth more if a buyer approaches me, instead of going to market?

Your business could potentially be worth more if a buyer approaches you, as an incoming enquiry is an indication of proactive interest.

However, it is important to gauge the credibility of an unsolicited approach as soon as possible, as many are just ‘kicking the tyres’ and seeing if they can acquire an asset at a knock-down price. Understanding the buyer’s intention early on will help you understand whether this is an endeavor worth following up with or not.

Here’s what to expect from consulting firm buyers.

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December 2016: Consulting Market Update

Consulting M&A Activity and Equiteq Consulting Share Price Index Performance

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By Ramone Param, Market Insights & Buyer Coverage Associate, Equiteq.

2016 ended with a number of high-profile deals being signed across all five of our knowledge-intensive services segments. The share prices of many listed consultants that form part of our Equiteq Consulting Share Price Index also reached record highs. This continued strong investor confidence in the sector is also observed across other industries as reflected by the strong gains of the S&P 500 and Dow Jones, as well as the FTSE 100 which reached an all-time high by year end.

december-update-blog-image-1The largest deal to be announced in December was KKR & Co.’s acquisition of cyber-security specialist, Optiv Security, from The Blackstone Group. The deal followed Blackstone’s filing for an initial public offering of Optiv last month. The sale of the business follows a number of recent high-profile and lucrative private equity exits of portfolio companies operating in the consulting sector, including the sale of Pactera by Blackstone and the sale of AlixPartners by CVC Capital Partners. We expect that these successful landmark sales will support strong appetite from financial buyers investing in the sector in the New Year.

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November 2016: Consulting Market Update

Consulting M&A Activity and Equiteq Consulting Share Price Index Performance

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By Ramone Param, Market Insights & Buyer Coverage Associate, Equiteq.

In November, we continued to observe strong deal activity amongst prolific IT services buyers such as Accenture, Cognizant and CGI Group. This month’s sale of AlixPartners by CVC Capital Partners also marked one of the largest private equity exits within the consulting industry. With respect to equity market performance, U.S.-based listed consultants tracked within the Equiteq Consulting Share Price Index have rallied following the Presidential election result. This is expected to be reflective of hopes amongst many investors of an improved business outlook in the U.S. stemming from future fiscal stimulus plans, corporate tax rate reductions and regulatory reforms.

CVC Capital Partners agreed to sell its stake in AlixPartners to company founder Jay Alix, as well as to investment firms: Caisse de dépôt et placement du Québec, Public Sector Pension Investment Board and Investcorp Group. The deal values AlixPartners at over $2.5bn and implies a current year revenue multiple of approximately 2.5x.

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October 2016: Consulting Market Update

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By Ramone Param, Buyer Coverage Associate, Equiteq.

Consulting M&A Activity and Equiteq Consulting Share Price Index Performance

As we anticipated in our third quarter update, significant deal activity is continuing to occur in the IT services segment, with a number of notable transactions in the sector being announced this month. This comes as the broader M&A market has observed a wave of mega deals across sectors, with October being reported as one of the busiest months for deal activity in the US, according to data from Dealogic.

In the month, the share prices of many listed consulting players contained within the Equiteq Consulting Share Price Index were impacted by quarterly earnings announcements, the release of macroeconomic data and US Presidential election uncertainty. The share price of WPP, a constituent of the Equiteq Media Share Price Index, was boosted by stronger than expected third quarter earnings. These results were in contrast to weaker quarterly earnings from some of its peers like Publicis. This variation in results amongst large listed media players has led some equity analysts to attribute these differences to rising competition for key client accounts as the evolution of digital media continues to disrupt the industry.

There were three notable deals announced this month within the IT Services segment:

  • In our recent article analyzing trends within Cloud Consulting M&A, we discussed the landmark acquisition of Appirio by leading Indian IT-Services player, Wipro, for $500m. Appirio will position Wipro as the leading Indian technology services player in the cloud services space.
  • The Blackstone Group sold Chinese IT outsourcing and consulting firm, Pactera, to a unit of Chinese shipping and air giant HNA Group. This deal reportedly values the business at c.$930m and returns Blackstone c.1.5 times on its initial investment of over $600m that it made in March 2014.
  • Aon agreed to acquire a 550-person US-based cyber-security specialist called Stroz Friedberg. The deal was seen as a move within the insurance industry to capitalize on the risk management opportunities from rising client concerns over cyber threats.

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