Major dealsprofiled include Infosys’ acquisition of WONGDOODY, HPE’s acquisition of RedPixie and Wavestone’s acquisition of Xceed.
The Equiteq Knowledge Economy Share Price Indexachieved robust rises over the period.
Infosys deepens its creative agency skills with WONGDOODY
Target: WONGDOODY is a US-based creative agency with studios in Seattle and Los Angeles providing strategy, research, brand and marketing positioning, creative design, advertising and production services across industries.
Buyer:Infosys is a global listed technology services player headquartered in India.
Deal Value: $75.0m
Deal Insight:This transaction exemplifies two important market trends. Firstly, it demonstrates the convergence of creative media with technology and consulting, as large technology players look to broaden their customer-focused advisory skills and take a larger share of the growing digital transformation consulting market. The deal also highlights the demand from the Indian outsourcers for US-based high-margin capabilities that enable them to build skills further up the consulting value chain.
The deal develops Infosys’ global connected network of Digital Studios to help clients respond to digital disruption of their industries. WONGDOODY builds on Infosys’ acquisition of UK-based product design and customer experience innovator Brilliant Basics, which was acquired last year for c.$9.7m.
2017 was a year of continued growth for Equiteq and further disruption of business models, which is transforming the industry that we have been tracking for 15 years. The disruption of the traditional consulting model from technology-enabled innovation, combined with economic trends, has led us to transition the definition of our industry coverage from consulting to the broader transforming knowledge economy. Our Global Knowledge Economy M&A report delivers you with actionable intelligence into the latest M&A and equity market trends across the knowledge economy, along with tips on how to consider these findings in the context of growing and selling your consulting or technology firm.
Insight Strategy Advisors joins Precision Value & Health
Ducker Worldwide joins Frontier Strategy Group
Axentel joins Park Place Technologies
8works joins Oliver Wyman
We have had a strong start to 2018 across regions, advising a variety of knowledge economy clients on their equity growth and closing a number of high-profile transactions. Here we highlight our advisory work with clients which resulted in M&A deal closures during the first quarter.
Notable deals included Capgemini’s acquisition of LiquidHub, Veritas Capital’s acquisition of PwC US’s government consulting business, Valtech’s acquisition of True Clarity and Livingbridge-backed Catalyst Development’s acquisition of Knadel.
Equiteq advised Ducker Worldwide on its sale to Frontier Strategy Group and Axentel Technologies on its sale to Park Place Technologies.
The Equiteq Consulting Share Price Indexfluctuated over the month and ended the period broadly flat.
Capgemini acquires digital customer experience firm LiquidHub
Target: LiquidHub is a US-headquartered global customer engagement company that help companies improve customer experience and drive growth.
Buyer: Capgemini is a France-headquartered global leader in consulting, technology services and digital transformation.
Deal Value: EUR400m (1.8x FY17 Revenue)
Deal Insight: In October of last year, The Times of India reported that Cognizant and Apax Partners were among shortlisted suitors for a potential acquisition of LiquidHub for as much as $600m. At the beginning of February, Capgemini announced that it would acquire the business for almost two times its revenue.
LiquidHub was founded in 2000 and raised $52.54m of Series B venture funding from ChrysCapital in 2014. The investment put the company’s pre-money valuation at $116.67m and enabled it to make investments in its growth including completing a number of acquisitions over 2016 and 2017. The company’s shareholder includes key management and investor ChrysCapital.
In a recent interview with Financier Worldwide, David Jorgenson, chief executive of Equiteq, suggests deal flow in 2018 will be supported by continued low interest rates and large pools of capital available for acquisitions among both strategic buyers and private equity investors.
With the forecast for M&A in 2018 predicted to be as lucrative as 2017, it’s anticipated businesses will continue to see a rise in unsolicited approaches from buyers. In fact, about a third of Equiteq transactions start with a client receiving an approach from a buyer.
However, despite a seller receiving an enquiry, there is no guarantee that a deal will be done. In reality, given the number of companies looked at by Trade and PE investors, the chance of it closing can be relatively low, so taking the right approach from the very beginning is essential in maximizing the opportunity and minimizing the opportunity cost of wasted effort.
In this blog Bruce Ramsay, managing director, business development at Equiteq, shares his thoughts on how best to manage the process from initial approach to a closed deal.
In his three-part series, Build or Buy? Equiteq’s Adam Blatchford discusses the pillars for successful growth through acquisition. In part one Adam addressed the strategic advantages acquisitions can offer.
Here in part two, he looks at the ways a professional service firm can fund an acquisition.
Generally, M&A news tends to give the impression that acquisition is an exercise exclusive to huge corporations with big cash balances. In the last year the consulting sector has seen a number of multi-billion dollar deals, including Blackstone spending $4.8 billion for Aon’s HR Outsourcing business to create Alight Solutions, and $2.6 billion for British engineering consultancy Atkins from SNC-Lavalin.
This perception fails to scratch the surface of acquisitions and hides the real picture. Of more than 2,500 consulting deals that took place in 2017, the mean deal size was a more reasonable $69 million. The median deal was even lower at $12 million, meaning half of all deals took place below this threshold. These numbers are far more attainable for a ‘regular’ growth-stage business and demonstrate that an acquisition is more achievable than one might have initially thought.
The final quarter of 2017 saw global deal activity in the consulting sector fall by 4% year-on-year and decline 1% as compared to the third quarter. As frequently observed, there were significant variations in deal activity by region and amongst market segments. There is strong buyer appetite for deals as we commence 2018. Continue reading →
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.