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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September 2016: Consulting Market Update

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

In September, we saw a number of high-profile deals being announced, particularly amongst buyers in the IT consulting and broader technology sector. This month also saw the performance of many listed consulting players contained within the Equiteq Consulting Share Price Index being positively impacted by macro-events such as poll results following the debates in the lead up to the U.S. elections and OPEC’s tentative agreement to cut oil production.

Accenture, a listed consultant tracked within the Equiteq IT Consulting Share Price Index, reported quarterly earnings above estimates, highlighting strength in their new bookings and an expansion in their profit margins. The announcement was followed by a 4% jump in their share price.

Accenture remains highly acquisitive, announcing three notable acquisitions this month:

  • DayNine, a leading 400-person global Workday consulting firm. The acquisition builds on past acquisitions by Accenture to strengthen its enterprise cloud services offering.
  • Kurt Salmon, a retail-focused consulting business and part of Management Consulting Group plc (MCG) was acquired for $165m in cash payable on completion. MCG’s disposal of Kurt Salmon follows recent exits from its healthcare and French operations, leaving MCG focused on its international operational performance consulting subsidiary Alexander Proudfoot.
  • OCTO Technology, a French IT consulting business focused on digital transformation and software development. The deal valued OCTO at €115m.

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August 2016: Consulting Market Update

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

In August, we saw some notable deal activity from regular buyers of consulting businesses and mixed performance from listed players contained within the Equiteq Consulting Share Price Index.

The share prices of consultants focused on cyclical industries, particularly the energy sector, were impacted by volatile oil prices and the release of favorable U.S. and European economic data in the month. We also saw some earnings announcements from listed professional services businesses, most notably from prolific consulting buyer WPP, whose earnings for the first half of the year highlighted that the advertising giant had benefited from the U.K.’s vote to leave the European Union as a favorable currency translation more than offset any negative effect of Brexit on the British economy. WPP’s shares rose following this earnings announcement by as much as 5.7%, its biggest intraday gain in almost 3 years.

There was continued notable activity in the month from professional services buyers, building on their growing Channel 2 (non-Assurance) offerings. The most notable professional services deal in August was EY’s acquisition of Society Consulting, a 150-person Seattle-based specialized analytics consulting firm. Growth in the consulting businesses of large accounting players has countered falling profitability from some of these firm’s assurance businesses, which are feeling the impact of increasing competition and the technological automation of elements of the statutory audit. In line with this trend, PwC UK announced at the end of the month that it will be recruiting over 1,000 new specialists by 2020 to meet increasing client demands for cyber security and privacy, data management and predictive analytics, as well as business systems and technology risk and controls. This week, Deloitte UK also announced its fastest revenue growth in 10 years, noting a strong year for its already well established advisory business, highlighting high levels of demand for M&A, risk management & regulatory, as well as business transformation capabilities using technologies such as digital, cloud and analytics.

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Consulting Sector M&A Deals (July 19th – August 1st)

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Research America, Inc. Acquires Viewpoint Consulting
Deal Size: Undisclosed Industry: Healthcare Date: July 19, 2016

Research America, a nationwide provider of marketing research, qualitative and quantitative surveys and analysis, announces the acquisition of Viewpoint Consulting, a leading agency specializing in Pharmaceutical Payer Research to augment its existing pharmaceutical offerings.

Headquartered in Langhorne, PA, Viewpoint Consulting offers a diverse and comprehensive portfolio of marketing research services to pharmaceutical and healthcare companies throughout the United States. Viewpoint Consulting’s team members have played roles in valuable healthcare payer research conducted by some of the largest, global pharmaceutical and healthcare companies. The acquired firm was founded in 1998.  “This is a tremendous opportunity for our staff to realize new projects and growth opportunities. Expanding the services offered to our existing medical clients, allows us to compete for projects on a much larger-scale,” said Robert Porter, President and CEO of Research America.

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Consulting Sector M&A Deals (July 5th – July 18th)

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BTS acquires two Italian companies and strengthens Southern European position
Deal Size: Undisclosed Industry: Professional Services Date: July 6, 2016

STOCKHOLM, Sweden, July 6, 2016 (GLOBE NEWSWIRE) — BTS GROUP AB (publ), – BTS, a leading global strategy implementation firm, acquires the operations and certain assets and liabilities from Cesim Italia Srl and Design Innovation Srl based in Milan, Italy.

Cesim Italia, with some 34 employees and contractors earning revenues of about 3.5 MEUR 2015, offers Business Acumen, Leadership, Innovation, Change Management training and consulting services. Design Innovation is a boutique design house with six employees and revenues of about 0.5 MEUR specializing in innovation and design consulting services. Both companies have a long history of repeatedly serving major Italian companies.

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Consulting Sector M&A Deals (June 20th – July 1st )

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Accenture Acquires Maglan, Expands Security Services in Israel
Deal Size: Undisclosed Industry: IT Consulting Date: June 20, 2016

NEW YORK; June 20, 2016 – Accenture (NYSE: ACN) announced today it has acquired Maglan, a privately-held Israeli cybersecurity company specializing in offensive cyber simulation, vulnerability countermeasures, cyber forensics and malware defenses, and IT security research and development with a focus on threat intelligence. Financial terms of the transaction were not disclosed.

The acquisition brings to Accenture a team of highly skilled cybersecurity professionals, who honed their skills fighting cyber crime and confronting cyber espionage around the globe. The acquisition advances Accenture’s strategy of leveraging Israel as a cybersecurity innovation hub to provide clients with cross-industry cyber defense consulting. Maglan has specialized tools and methodologies that will augment Accenture’s full range of security services and defensive countermeasures, comprising strategy and risk management through enterprise and extended enterprise security.

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Consulting Sector M&A Deals (June 6th – June 17th)

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Basil Advisors acquires human capital consulting firm TGC Consulting
Deal Size: Undisclosed Industry: IT Consulting Date: May 16, 2016

NEW DELHI: Talent advisory firm Basil Advisors has acquired human capital consulting venture TGC Consulting in an all-stock deal, the Delhi-based, consumer internet-focused consultancy announced on Tuesday. While the terms of the transaction were not disclosed, the acquisition is expected to help Basil Advisors to expand its presence beyond the consumer internet space, according to a company-issued statement.  “At this point, we feel we’re in a position where we can start focusing on creating a horizontal global presence, enabling our customers to experience even more useful, seamless, iterated and predictable recruiting experience. This is where TGC Consulting comes in,” Prateek Srivastava, chief executive of Basil Advisors said.

According to the press release, Bengaluru-based TGC Consulting, which was founded in 2012, offers services, such as, executive search, leadership coaching and talent advisory, and counts companies, such as, EY, Wipro, American Express Myntra and Sasken, among others, as recurring clients.

“We are very excited to be a part of Basil Advisors, together we look forward to making the landscape evolve significantly and bring the much needed innovation for our customers globally,” said Savitha Prasad, partner at TGC Consulting. http://economictimes.indiatimes.com

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Consulting Sector M&A Deals (May 16th – June 6th)

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IBM deepens Salesforce play with Cloud consulting partner acquisition
Deal Size: Undisclosed Industry: IT Consulting Date: May 16, 2016

IBM has completed the acquisition of Cloud consulting and implementation service provider Bluewolf, one of Salesforce’s top partners globally. Designed to expand Big Blue’s Cloud capabilities in the market, terms of the deal will see Bluewolf join IBM Interactive Experience (IBM iX) to form a deeper consulting capability for clients adopting Salesforce solutions.

As one of Salesforce’s longest standing consulting partners, Bluewolf has implemented over 9,500 Salesforce projects for clients across the world, including Vodafone Hutchinson Australia, Stanley Black & Decker and Sapa Building Systems. “Delivering an exceptional customer experience has emerged as a fundamental element in modern business strategy, and essential to any company’s competitive position,” IBM iX Global Leader, Paul Papas, said.

“With Bluewolf, we’ve added expertise to address the growing demand from Salesforce clients for transformational, Cloud-based services that allow them to transform the experiences they provide their customers.” While financial terms of the deal were not disclosed, IBM iX provides next-generation services spanning industry strategy, creative and design, to scalable digital, commerce, mobile and wearable platforms.

“As a part of IBM iX, we will amplify our capabilities to create extraordinary customer moments and digital experiences,” Bluewolf CEO, Eric Berridge, added. “Combining forces brings game-changing strategy, data and design expertise, for customers of all sizes and industries, instantly transforming us into a formidable global partner in the Salesforce ecosystem.”

(http://www.reseller.co.nz)

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Consulting Sector M&A Deals (May 3rd – May 16th)

businessman doing handstand on the beachWashington D.C.-based Brittenford Systems, Inc. Joins Wipfli LLP
Deal Size: Undisclosed Industry: Professional Services Date: May 3rd, 2016
Wipfli LLP (Wipfli), one of the top 20 accounting and consulting firms in the United States, announced today that Brittenford Systems, Inc. joined the firm effective May 1. Brittenford Systems, Inc., a firm headquartered in Reston, Virginia, provides accounting system, enterprise performance management, and CIO Advisory services to small and mid-market businesses and nonprofit organizations.
“The addition of the seasoned professionals and extensive software development expertise of Brittenford Systems, Inc. will strengthen the firm’s ability to provide even more innovative solutions to our clients, helping them face their challenges today and well into the future,” said Rick Dreher, managing partner of Wipfli LLP. “While this merger will greatly enhance our firm and its consulting practice, it holds even greater benefits for our clients.”
Brittenford Systems, Inc. specializes in providing financial system and accounting software implementations and support services to hundreds of businesses and organizations around the country, focusing specifically on Microsoft Dynamics SL, Microsoft Dynamics GP and cloud-based Intacct and Host Analytics, as well as Brittenford’s own third-party products. The majority of the firm’s clients are small and mid-market businesses, nonprofit organizations, government contractors, professional services firms and international businesses. As part of this combination, approximately 30 Brittenford Systems, Inc. professionals, including chief executive officer Shereen Mahoney, have joined Wipfli. Founded in 1997, Brittenford Systems, Inc. has one office located in Reston, Virginia (Washington D.C. area), but provides financial system and accounting software implementations and support services to hundreds of businesses and organizations around the country.
Shereen Mahoney, chief executive officer of Brittenford Systems, Inc., said, “Combining Brittenford Systems’ deep implementation and third-party enhancement expertise with Wipfli’s broad consulting capabilities and vast resources will help us to continue to help our clients to succeed in the ever-changing marketplace. We are excited to join Wipfli and for what the future holds for our combined firm and all of our clients.”
The combined firm will have over 1,500 associates, including 184 partners, 35 office locations in the United States and India. (http://www.cwrichmond.tv)

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Consulting Sector M&A Deals (April 20th – May 3rd)

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Wood Group Acquires Ingenious
Deal Size: Undisclosed Industry: Engineering Consulting Date: April 22, 2016
Wood Group has acquired Ingenious Inc., a supplier of proprietary software and consulting services to the global chemical, oil & gas, and energy industries. The acquisition provides a strong MOM systems capability that builds upon and diversifies the capabilities of Wood Group Mustang’s automation and control business, within which it will operate. Ingenious’s software products consist of remote performance monitoring, production planning and scheduling, and training, including e-learning and training simulators for the process industries.
Founded in 2000 by Vibhu Sharma and Bharat Kamdar, Houston-based Ingenious provides consulting and engineering services to support software sales and non-software-related services such as process engineering, design and simulation, and process safety management. Ingenious has an office in Mumbai, India, that supports regional customers, executes international projects and assists in software development. The Mumbai operations expand the automation and control business’s geographic footprint and client relationships in Asia and the Middle East.
Wood Group will be able to leverage Ingenious’s strength in the operator training simulator market to enhance its control system simulators, training tools and services.
(http://www.valve-world.net)

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