Leadership succession involving a transition from the founders has its own specific challenges. Founders leave a huge legacy in the business, which in one sense is extremely valuable but can also result in a level of dependency that introduces risk.
Governance roles will change at exit, when an owner/founder will typically move from an executive position. The challenge here is that the owner/founder will need to be conscious of their change in role and step back sufficiently to allow successors to create their own leadership identity, while still continuing to offer their unique skills and experience in a broader governance role.
If you’re a founder preparing for a transition, getting it right involves ensuring you set up the new CEO for success, while simultaneously moving away from the operational side of the business and continuing to add value.
The difficulty for founders is they are used to being in control and making decisions independently, which means trusting the new leader can be difficult.
If they do achieve this, it ensures value is not diluted. In fact, it can result in value being enhanced.
FIS sells majority stake in Capco to private equity
Clayton, Dubilier & Rice announced their acquisition of a 60% majority stake in Capco from FIS, a leader in financial services technology. Capco is the public brand for FIS’ management consulting business and specializes in business, digital and technology consulting services for the financial services industry. FIS acquired Capco for $292m in 2010 and will receive net cash proceeds of $477m from the sale, while retaining a 40% stake in the business.
New Mountain acquires OneDigital Health and Benefits
OneDigital, one of the top buyers that we identified in the HR space, announced that it has been acquired in an all-cash deal by private equity investor New Mountain Capital. New Mountain is acquiring a majority ownership in the business from Fidelity National Financial Ventures for a reported $560m. The investment will be aimed at providing strategic guidance and industry expertise, while helping drive OneDigital’s continued growth.
OneDigital is the United States’ largest provider of employee benefits services and offers employers a combination of strategic advisory, analytics, compliance support, HR capital management tools and comprehensive insurance offerings. The business serves 35,000 companies and manages c.$4 billion in premiums.
Equiteq is pleased to announce the sale of its long-term client, Aecus Limited, to The Hackett Group Inc. Aecus is an award-winning European consultancy that helps clients optimize business process outsourcing (BPO), IT outsourcing (ITO) and robotic process automation (RPA) through benchmarking and implementation consulting.
Equiteq acted as exclusive financial advisor to Aecus Limited and its shareholders on the sale of the business having previously worked with the company for over 8 years in a strategic advisory capacity. The transaction closed on April 7, 2017.
Discussing the transaction, Aecus Managing Director Rick Simmonds commented, “We are really excited by this – joining The Hackett Group represents a fantastic move forward for Aecus. The strength of The Hackett Group’s brand combined with the breadth of complementary services will enable us to serve our clients even more effectively and will provide our people with greater professional opportunities.”
The most prolific acquirers of knowledge-led businesses are undergoing unprecedented diversification and convergence across adjacent consulting segments and sectors. At the same time, digital transformation is driving hybrid business models with consulting, technology and managed service revenue. This change is fuelling high levels of M&A activity from trade and private equity investors, which we review in our 2017 M&A report. For owners considering selling their business, an appreciation of these trends is critical to uncovering the synergistic buyers that may offer the highest value.
Convergence between consulting offerings
Global consulting clients are increasingly looking to their advisors for best-in-class, end-to-end consulting solutions. These trends are driving established consulting buyers to use M&A to enter new geographies and acquire complementary capabilities.
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.
Equiteq’s David Jorgenson and Jean-Louis Michelet met at ESSEC Business School in Singapore to discuss the opportunities and challenges impacting M&A activities in the Asia-Pacific region.
In this blog, the final part of their discussion, they both explore the huge opportunities for knowledge-driven services businesses in the Asia-Pacific region.
Simply put, there are massive opportunities in Asia-Pacific for knowledge-driven B2B services companies. While most of the region’s services markets are not as advanced as in more developed economies in Europe and North America, globalization and technological revolution are driving international demand for specialist businesses in Asia-Pacific.
The review covers deal activity and equity market trends across fives consulting segments: Management Consulting, IT Services, Media Agencies, Engineering Services and Human Resources. Equity market trends are analyzed through the Equiteq Consulting Share Price Index, the only published share price index for the industry.
Strong deal activity
In 2016, the number of completed transactions in the consulting sector nudged up to reach a nine-year high. This was in spite of the restraining influences of slowing growth in global GDP, the UK’s vote to Brexit and the US Presidential election, which caused a slowdown in the preceding quarters. Activity from both strategic and financial buyers swiftly bounced back, and the year ended with conviction and momentum that has carried into 2017.
The top consulting segments for deal activity were the rapidly evolving Management Consulting, IT Services and Media Agency segments.