Those in marketing communications (marcoms), understand the value in delivering a clear message to the right audience, in the right way, and at the right time. The developments seen in the health and life sciences sector in recent years have created significant demand for marcoms services. Expertise range from the design of patient portals for health care providers, to effective and compliant strategies for pharmaceuticals and data-informed messaging for self-managed care devices.
Marcoms agencies that have adapted well against this transformative backdrop have seen high demand for their services and, in some cases, their entire business.
Here we look at the current challenges marketing and communication firms are tackling for clients in the health sector, as well as the opportunities for specialist agencies looking for acquirers or Private Equity investment.
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
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.
We recently ran two 30-minute webinars on putting margins at the centre of your business. The first of these outlined the steps businesses must take to improve margins which you can view here, while the second was a more specific look at how to implement these steps in order to improve margins in a sustainable way which you can view here. This week, we’re looking at some of the questions asked during the second webinar.
Our sales leaders are all about closing the deal and trying to increase the size of the deal. But our delivery staff are often challenged to translate that into the expected profits, can you comment on that?
When we look at the root causes of problems with margins, it’s often the lack of collaboration between sales and delivery. We commonly find this lack of collaboration can result in delivery managers discovering deals aren’t scoped properly, or the wrong skillsets were assigned.
It’s therefore important that delivery managers have early visibility of the pipeline to get resources lined up for the right client and at the right rates. That can only happen if there’s collaboration, and with both sales and delivery having access to the same information.
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.
There may not be a more fundamentally important topic for consulting firms than improving profits.
Shareholders ultimately want a return on their investment and buyers are looking for evidence of healthy growth, while strong profitability is required to sustain growth and equity realization.
The levers that need to be pulled to improve margin – revenue and cost – might be well understood, but the combination of activities required are often more nuanced.
We’ve identified the top strategies firms can use to start improving profits now:
The leadership team must make profitability an ongoing focus
Profitability has to become embedded in the leadership team’s mindset for sustainable margin improvement to be successful.
Achieving this requires strong communication around accountabilities, clear success measures being established and tactical activities – such as margin exception reporting, resource management, and utilization forecasting – becoming integrated into regular business updates.
Once a shared understanding of what success looks like is established within this team, firms can create strategic work streams – such as market expansion or IP development – and make people accountable.
According to a report by The Register, Oracle has hired consultants to conduct due diligence research on acquiring Accenture. Accenture is a major Oracle partner, while Oracle has a material services business which operates alongside its software offering. The combination would significantly enhance both companies position in their respective markets, creating a leading provider of end-to-end digital transformation products and services.
A deal with Accenture would follow Oracle’s recent acquisition of NetSuite for $9.3bn and its acquisition of PeopleSoft in 2005 for $10.3bn. With Accenture’s market cap at over $77bn, the deal would be by far its largest acquisition to date.
Oracle has been focusing on its cloud business, but is still considered to be behind market leaders Amazon Web Services, as well as Microsoft, Google and IBM. Following reports of the deal, Accenture’s stock fell, with some equity analysts raising concerns about the deal’s implications for Accenture’s independence and the risks to Accenture’s strong relationships with Oracle’s competitors like SAP, Salesforce, ServiceNow and Workday.
Equiteq’s CEO, David Jorgenson, and Jean-Louis Michelet met with Professor Kevyn Yong (Dean of ESSEC Asia-Pacific and specialist of entrepreneurship) at ESSEC Business School in Singapore to discuss the opportunities and challenges impacting M&A activities in the Asia-Pacific region.
This is the third part of their discussion: What advice would you give to consulting firm owners in one of the Asia-Pacific countries?
The consultancy landscape in Asia-Pacific has changed in the last few years. There has been a strong development in the use of consultants as the regional economies have grown and become less dependent on the primary sector, and have seen a surge in secondary and services sectors activities.
A 2016 report from the United Nations Economic and Social Commission for Asia and the Pacific shows the increased activity in the services sector is partly down to its role in facilitating global value chains in the manufacturing sector. It also attributes this to the growth of digital-intensive services in sectors like financial services, telecommunications and digital media and marketing.
The New Year commenced with some notable deal activity and M&A news across all five of the consulting segments that we track. The share prices of many listed consultants that form part of our Equiteq Consulting Share Price Index also rose on the back of strong market sentiment and earnings announcements.
WS Atkins and CH2M $4bn merger talks
The Times reported that British engineering and design consulting firm, WS Atkins Plc (ATKW.L) and US-based CH2M are in merger talks. Atkins had said last year that plans by the new U.S. administration and U.K. government to increase infrastructure spending would benefit the company. Atkins had been using M&A to selectively increase its geographic footprint and capabilities, in a segment that is considered to be consolidating as players look to reduce overheads and increase global market share.
2016 ended with a number of high-profile deals being signed across all five of our knowledge-intensive services segments. The share prices of many listed consultants that form part of our Equiteq Consulting Share Price Index also reached record highs. This continued strong investor confidence in the sector is also observed across other industries as reflected by the strong gains of the S&P 500 and Dow Jones, as well as the FTSE 100 which reached an all-time high by year end.
The largest deal to be announced in December was KKR & Co.’s acquisition of cyber-security specialist, Optiv Security, from The Blackstone Group. The deal followed Blackstone’s filing for an initial public offering of Optiv last month. The sale of the business follows a number of recent high-profile and lucrative private equity exits of portfolio companies operating in the consulting sector, including the sale of Pactera by Blackstone and the sale of AlixPartners by CVC Capital Partners. We expect that these successful landmark sales will support strong appetite from financial buyers investing in the sector in the New Year.