Hot demand for big data and analytics consultancies

Big data cropped

Businesses are continuing to capture and interpret customer data, and as data analysis translates into increased profits, the acquisition demand for consultancies in big data and analytics is driven higher. Consider, as an illustration of this trend, the 165% increase in big data services’ global revenue between 2012 and 2014.

Consultancies advising on big data strategies play an integral role in a corporation’s long-term adoption of specific data and analytics technology providers. Because of this, such hardware and software providers have increased their pursuit of partnerships and collaborations with professional services (PS) firms. The sector wide shortage of PS practitioners who are able to implement, interpret and leverage big data is reflected in their revenue: In 2014, PS companies represented more than 38% of big data’s global revenue – almost US$10.5bn.

There are 4 primary drivers that enable acquirers to monetize the broad market opportunity in big data and analytics:

  1. Leverage existing services: Integration of big data and analytics capabilities into the existing advisory capabilities allows deeper, more robust insights to be drawn out. Integration also lengthens the advisory period by adding a valuable analytics advisory session at the start of a project and the potential for analytics services when nearing the project’s conclusion
  2. Acquire talent: There is a high demand for professionals with the required analytical expertise – and it can be more efficient to acquire this expertise via an M&A strategy, rather than developing the necessary skills in-house
  3. Fuel business development: With additional capabilities, there is the potential to increase client and market share by bringing the newer technologies through along with more traditional service offerings
  4. Gain access to big data and analytics intellectual property (IP): Acquirers are focused on how to remain at the cutting edge of technological innovation, with top consulting firms launching standalone ‘innovation labs’ for big data and analytics. To fuel development of these labs they are adopting an aggressive acquisition strategy

M&A activity in the big data and analytics sector is healthy across the globe, with top buyers being diverse and usually international. In North and South America, Teradata (5 deals) and IBM (3 deals) have been the most active 2010-2016. EMEA has seen SAP make 6 deals and Accenture, 5. In APAC, NTT has been active with 4 deals.

The years 2010-2016 (year to date February 2016) saw a total of 639 transactions in this space with 65% of the acquired firms based in North America. Big data and analytics firms continue to be able to command premium prices; IP and stable revenue growth, coupled with high profit margins and deep sector specialism are reflected in higher multiples for these businesses. These multiples lend themselves to a strong forecast.

With 17 deals in big data and analytics since the beginning of the year already, we believe this presents exciting opportunities for both consultancy owners looking to sell their businesses, and for acquirers determined to remain at the forefront of technological development to increase their market share.

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners prepare for sale and sell their business. Register here to gain full access.

Equiteq’s Global M&A report 2015 is now available

M&A report crop

Equiteq has just launched our annual report into global M&A activity in the consulting sector – this is the only publicly available information on the global consulting M&A market.

This year’s report has found that while there was a minor dip in deals in 2013, deal volumes recovered in 2014, with a 13% uplift to the highest deal volume seen since 2007. Around 80% of all the 2,274 M&A deals in the consultancy sector were carried out in developed, western markets in 2014, with around half occurring in North America and a third in Europe (mainly in the UK).

There has been an upward trend in EBITDA and revenue transaction multiples and 70% of the M&A volume is from deals of less than $40m.

Shant Yeremian, Equiteq’s Global Buyer Relationship Director, believes that we are in a very positive seller’s market, good news for consulting firm owners who are aiming to sell.

Mr. Yeremian comments: “However, uncertainties are increasing in some markets that may impact the overall picture. We expect the US and UK to continue an overall upward trend in deal volumes and values, while uncertainty in continental Europe, Asia and Africa/Middle East will make these markets less predictable.”

Looking at the most prolific buyers of consulting firms in 2014, the top of the list was dominated by the communications and marketing agencies. WPP, one of the world’s largest communications services groups, acquired 52 companies in 2014, of which 23 were consulting businesses. The agency was also a leading buyer in 2013 with 22 acquisitions in the consulting sector during that year.

Private equity (PE) is increasingly attracted to the consulting sector for investments and 2014 was a record year for PE acquisitions. Looking at the long-term view of private equity or investment buyers in the consulting sector, we see an increasing proportion of buyers coming from this buyer category. This is in line with the overall sentiment in the PE buyer community, which is becoming increasingly competitive and thus looking more favourably on the consulting sector to find their returns.

This market trend report is aimed at shareholders, prospective shareholders, investors and corporate development executives in the consulting industry. It also provides valuable insight for those involved in running a consulting business or those looking to sell or acquire a consultancy.

In future blogs we shall be drilling down into other key areas of the report, such as geographical hotspots, a review of the market broken down by consultancy area and commentary on the overall market.

To download a full copy of the report please click here. You need to be a member of Equiteq Edge to do this but membership is free and takes only moments.