H1 2018 Knowledge Economy Global M&A Update

Buyers focused on a smaller number of transformational deals in the first half of the year, as tapering of quantitative easing programs accelerates

By Ramone Param, Director, Equiteq

  • Strong rise in average deal size and valuation multiples in H1 2018
  • The number of completed deals fell 5% on H1 2017
  • Activity remains focused on IT services and management consulting
  • Equiteq Knowledge Economy Share Price Index continues to reach new highs

Across the global knowledge economy in the first half of the year, average M&A deal sizes and valuation multiples rose markedly, but the number of completed deals fell. Many buyers pushed ahead with a smaller number of larger transformational deals for their businesses at premium prices in the current low interest rate environment. This is against a backdrop of rising signs that quantitative easing programs are coming to an end across developed economies.

The following trends are discussed in more detail in our recent mid-year M&A update report.

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Global consulting M&A mixed in the second quarter, after a strong start to the year


By 
Ramone Param, Associate Director, Equiteq.

Equiteq’s quarterly market updates provide an indicative guide to current M&A market conditions in the consulting industry. However, it should be noted that we typically observe large variations between quarterly M&A volumes, which are not always reflective of longer term trends.

M&A activity was mixed in the second quarter after a strong start to the year. Overall global deal activity in the consulting sector fell by 12% quarter-on-quarter. Deal volumes fell by just 2% on the same quarter last year. The Equiteq Consulting Share Price Index rallied in the second quarter, achieving similar returns to the S&P 500.

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Equiteq’s tenth annual review of the global consulting M&A market highlights that deal activity has reached a nine-year high

By Ramone Param, Associate Director, Market Intelligence & Buyer Coverage, Equiteq.

The Equiteq Global Consulting M&A report is the most comprehensive publicly available study of the knowledge-intensive services industry.

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.

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Private Equity firms demonstrate strong demand for consulting businesses

Eight mistakes when building a sale-ready business

By Alex White, Associate Director, and Ramone Param, Associate Director, Market Intelligence & Buyer Coverage.

Private equity (PE) providers are enthusiastic investors in knowledge intensive business services.  Last year was marked by some headline grabbing exits and new investments by the largest global buyout firms and this had a re-affirming effect on PE’s keen interest in this space.  These included KKR’s acquisition of Optiv Security from Blackstone, as well as the sales of AlixPartners by CVC and the divestment of Carlyle’s remaining stake in Booz Allen Hamilton.

Our own experience of achieving many great outcomes for clients who secured PE investment in 2016, and the line of investors queuing at our door for deal flow, bodes well for owners in 2017.

Sustaining growth in successful businesses – an owners challenge

A challenge for many owners of valuable businesses is the changing attitude to risk that creeps up as success is achieved. It’s natural for sentiment to shift from value creation to value preservation. While natural, it’s also a sure sign that owners’ personal financial portfolios are out of balance and a warning that excess cautiousness will be sub-optimal for their business in the longer term.

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Global consulting M&A and stock market performance strong in the third quarter

By Ramone Param, Buyer Coverage Associate, Equiteq.

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The Equiteq Consulting M&A Index remains significantly above long-term averages and the Equiteq Consulting Share Price Index achieves a ten-year high.

Global consulting M&A activity, as tracked by the Equiteq Consulting M&A Index, was robust in the third quarter. Deal volumes rose in comparison to both the prior quarter and the third quarter of 2015 with serial acquirers like Dentsu, Accenture and Deloitte continuing to be highly active. Third quarter M&A activity was highlighted by landmark transactions within media and management consulting, as well as the broader IT sector.

The Equiteq Consulting Share Price Index also performed very strongly this quarter, outperforming both the S&P 500 and FTSE 100. The index is now at a ten-year high with particularly strong increases in the management consulting and engineering consulting indices.

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