Equiteq’s Consulting Sector M&A Deals: September 2017

  • EOH acquires AFON Pte Ltd.
  • GNC Group merges with Grant Thornton Australia
  • Investit joins Accenture
  • Certeco merges with P2 Consulting

“We are seeing an increasing trend of well-managed consulting firms joining the practice of a larger group to deliver a joint growth strategy. Over the past month, the deals Equiteq has completed highlight this growing trend.”

Pierre Briand, Managing Director, Head of M&A and Strategic Advisory, Australia – New Zealand, Equiteq

EOH acquires AFON Pte Ltd.
Deal Size: Undisclosed Industry: IT services Date: September 13 2017 

Equiteq advised EOH, Africa’s largest technology and services provider, on its acquisition of AFON Pte Ltd, a Singapore-based IT services firm specializing in the delivery of ERP solutions.

Established in 1999, AFON Pte provides enterprise resource planning solutions to SMEs, based on a select group of platforms from partners such as SAP and Microsoft. AFON Pte’s offering is a combination of end-to-end ERP solutions to help SMEs boost efficiency, visibility and control, and advisory services by qualified accountants and IT professionals for successful ERP implementation.

For EOH, the deal signifies the company’s intention to expand its global presence into South-East Asia and builds on its international presence in over 50 countries.

EOH’s global technology service offering is anchored in market-driven insights and industry-specific solutions which is best secured by understanding their clients’ culture. Expanding its global presence into South-East Asia with the acquisition of AFON Pte EOH has established an important bridgehead in the region and remains closely connected to the communities it seeks to serve.

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Equiteq advises Spire Research and Consulting Group on merger with Yamada Business Consulting Co. Ltd.

Spire Tombstone
We are pleased to announce the merger of our client, Spire Research and Consulting Group, with Yamada Business Consulting Co. Ltd (YBC), one of Japan’s largest consulting firms. Equiteq acted as exclusive financial advisor to Spire.

YBC acquired an 80 per cent stake in Spire Research and Consulting Pte Ltd, the parent company for the Spire Research and Consulting group of companies. Leon Perera, the co-founder of Spire, will continue to serve as the CEO of the group, retaining a 20 per cent stake.

The merger makes Spire part of a  much larger and publicly listed corporate group, which is expected to create more access to new consulting solutions, economies of scale, investment resources and synergistic business development possibilities. With the merger, the Spire Research and Consulting brand will become the global brand for YBC outside of Japan.

Leon Perera, Chief Executive Officer of Spire, said: ”Joining the Yamada Consulting Group is the opening of a key chapter in the life of Spire Consulting & Research. I am grateful to Equiteq for the valuable support their Singapore team have provided throughout the process, from the preparation phase to the closing of the deal.”

Jean-Louis Michelet, Head of Equiteq in Asia Pacific, commented: ”Leon Perera and the Spire team have been great partners with Equiteq in this project, and the efficiency of the process owes much to the excellent mutual understanding among the parties. We are glad and proud to have contributed to this success.“

Keisaku Masuda, Managing Director of Yamada Business Consulting, added: ”I am looking forward to seeing the synergies coming to fruition between the two organisations and the development of our group being boosted by this strategic move. We have appreciated all the work done by the Equiteq team to support Spire, but also  help the two parties reach a fair and balanced agreement.”

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Merger & Acquisition deal drivers in the consulting sector

cropped buy and sellThe most common reason for one consulting firm to acquire another is to strategically enhance their business e.g. to help reach a new market place or geographic area. However, the growing number of private investors and private equity firms active in the consulting market mean that people are now also acquiring purely for financial and investment reasons.

Our 2014 Global Consulting Mergers & Acquisitions Report in the consulting sector has some statistics on this. In the meantime we’ve outlined what buyers are looking for when considering an acquisition.

Firstly, what are their considerations when the motivation is ‘strategic fit’:

1. Company Scale. Their firm struggles to win lucrative contracts with key clients because their scale does not compare with larger competitors. They need to acquire to achieve the scale necessary to attract the kind of clients that sign the bigger deals.

2. Shareholder Pressure. They may be a plc with pressure from investors to grow shareholder value, but their organic growth options cannot deliver. Acquiring a private firm on a profit multiple less than their own traded multiple will achieve growth faster and add instant value for their shareholders.

3. Global Extension. Their target clients are increasingly global and they don’t have the international profile necessary to compete. Acquiring a company to build a global presence, or achieve a local culture fit, will expand their firm’s capabilities to attract and service clients in their chosen markets.

4. Sector Extension. They have a strong track record in one industry sector, their service is transferable into other sectors, but they know that cost of entry is going to be high. Acquiring a similar firm with an existing track record and a client list in other sectors will accelerate their entry into new industries.

5. Service Extension. They have excellent skills in their domain, but there is a demand for services adjacent to theirs and they don’t have the skills to service it. By acquiring another consulting firm with the competencies they require, they are able to increase their footprint in the combined client list and develop new business elsewhere.

Understanding the motivations of buyers to acquire for strategic reasons, presents an opportunity for you to view your consultancy through their eyes. It can help you assess what aspect of your business makes you attractive to a potential buyer – perhaps even challenging some previously held assumptions about how you grow your business to prepare it for sale.

What are the financial motivators for private equity firms and investors:

1. Pure Investment Potential. They are a wealthy investor who needs to achieve a better return on capital and they are looking for a cash generative business with healthy profits. Service businesses like consulting firms, if well run, have a reputation for delivering high margins and good cash flow. This presents an opportunity to spread the risk and improve the return from their portfolio.

2. Leveraged buy-out. They are a private equity firm with an obligation to provide an outstanding investment return to their fund providers. A private consulting firm, with founders that are ready to retire and a good management team who are ready for the next stage of growth, presents a good investment opportunity. They will buy out the owners for cash, but provide most of that cash through loans against the business. The founders are happy, the firm grows, pays off its debt and both the private equity firm and management team will benefit.

3. Distress Sale or Turn Around. They make their living by finding firms that are under performing but have the potential to do much better. They want to find a mature consulting company with a poor order book and a worn out management team, ready to sell at a significant discount to the potential market value of the firm. They will acquire the firm, turn it around, and sell it on a year or two later for a significant capital gain.

In September we will publish the results of in-depth research carried out with commercial buyers in the US and Europe. The report will contain fresh insight into what buyers want, how hungry they are to buy, what’s particularly on their agenda and an indication of the prices they are prepared to pay.

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