Despite a politically-charged global environment and the increasing number of regulatory hurdles, the high levels of M&A experienced in 2016 have been resilient in 2017 and we have also seen the continuation and evolution of a number of trends.
Looking at M&A broadly, we are seeing that regional differences are no longer as prevalent. In an increasingly global economy, acquirers from Europe and North America alike are taking an active role, canvassing the global market place for M&A opportunities that support their non-organic growth ambitions.
Our fourth annual global survey of buyers of consulting businesses delivers current, actionable intelligence in the five segments Equiteq specializes in: Management consulting, IT consulting, Media & Marketing, Engineering consulting and HR consulting. Findings, published today, reveal:
Buyers expect to initiate 50% more acquisitions year-on-year
Convergence continues to be a key trend as buyers look to diversify
55% of buyers think targets could be better at communicating their market proposition
94% of buyers say it is important to retain management teams post-acquisition
Over 70% of targets do not make their IP apparent to prospective buyers
Three quarters of buyers expect at least 40% of a target’s clients to be blue chip
There was notable activity in October from a range of prolific acquirers of consulting firms, particularly those active within the IT Services segment. Major deals included DXC Technology’s acquisition of Logicalis SMC, Orange Business Services’ acquisition of Business & Decision and Office Depot’s acquisition of CompuCom. There were also two notable digital acquisitions announced by Cognizant and three healthcare-focused deals announced by Atos. Equiteq was also pleased to advise VISEO on their acquisition of Singapore-based IT Services firm NAIT Consulting and property consulting firm McBains Cooper on their sale to RSBG.
Overall global deal activity in the consulting sector rose by 1% year-on-year. Deal volumes were flat as compared with the second quarter. These overall trends masked large variations in deal activity amongst market segments. The Equiteq Consulting Share Price Index continues to show record highs as investor confidence in the sector remains strong.
M&A Activity strongest in the Media Agency and Management Consulting segments
Despite notable deals occurring in HR and IT, deal activity fell in these segments. There was a strong rise in M&A within Management Consulting and Media. Engineering deal activity rose strongly against the prior quarter, but remains broadly flat on the same quarter last year.
Over September, we observed high-profile deals from prolific knowledge-intensive services acquirers across a variety of transforming spaces of the consulting market, including digital transformation, Salesforce consulting, real estate advisory, benefits consulting and traditional business consulting. In the last month, Equiteq advised four of its clients on the sale of their business to the practice of a larger group.
Accenture acquired creative agency Wire Stone, which provides a range of strategy and marketing campaign services that develop digital consumer experiences. Wire Stone was founded in 2000 in San Francisco and has built a reputation for the use of technology and data to improve marketing campaign return on investment. The business has worked with a number of blue-chip clients including, Microsoft, HP, PayPal and eBay.
As highlighted in our latest quarterly M&A update, Accenture continues to be highly acquisitive and is developing Accenture Interactive’s capabilities and talent across marketing and consulting. According to a recent report by Adweek, Accenture Interactive’s projected 2017 revenue of $6bn places it above Havas Worldwide, although it is not a holding company and therefore does not rank among the “Big Six” of WPP, Omnicom, Publicis, Havas, IPG and Dentsu.
We recently ran a series of webinars exploring the themes within our Global Consulting M&A report 2017, which reviews the key M&A and equity market trends within the consulting industry across five of Equiteq’s industry specialisms: Management Consulting, Media agencies, Engineering consulting, IT services and HR
In this week’s blog, we outline some of the key topics discussed in our IT Services webinar, which provides vital insight for IT Services firm owners considering selling, including average deal size and valuation multiples, drivers for deal activity, top buyers and M&A activity by region.