Equiteq advises CMF Associates on its sale to CBIZ, Inc.


Equiteq is pleased to announce that it has advised CMF Associates (“CMF”), a leading provider of financial and operational consulting services to the private equity sector, on the sale of its business to CBIZ, a national, publicly-traded professional business services firm.

This transaction highlights Equiteq’s position as the leading global provider of advisory services exclusively to firms in the knowledge-intensive business services sector.

Founder and Managing Partner at CMF, Thomas Bonney said, “CMF sought a committed partner who shared our growth-oriented vision of scaling our position as a premier service provider to private equity and their expanding portfolio. We found in CBIZ an advocate that will provide us with offices across the country, complementary tangential services and the resources to drive portfolio value creation in a more comprehensive way and on a national scale.”

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May 2017: Consulting M&A Update

By Ramone Param, Associate Director, Equiteq.

FIS sells majority stake in Capco to private equity

Clayton, Dubilier & Rice announced their acquisition of a 60% majority stake in Capco from FIS, a leader in financial services technology. Capco is the public brand for FIS’ management consulting business and specializes in business, digital and technology consulting services for the financial services industry. FIS acquired Capco for $292m in 2010 and will receive net cash proceeds of $477m from the sale, while retaining a 40% stake in the business.

New Mountain acquires OneDigital Health and Benefits

OneDigital, one of the top buyers that we identified in the HR space, announced that it has been acquired in an all-cash deal by private equity investor New Mountain Capital. New Mountain is acquiring a majority ownership in the business from Fidelity National Financial Ventures for a reported $560m. The investment will be aimed at providing strategic guidance and industry expertise, while helping drive OneDigital’s continued growth.

OneDigital is the United States’ largest provider of employee benefits services and offers employers a combination of strategic advisory, analytics, compliance support, HR capital management tools and comprehensive insurance offerings. The business serves 35,000 companies and manages c.$4 billion in premiums.

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The highest price for your consulting business may well come from outside your core industry

The most prolific acquirers of knowledge-led businesses are undergoing unprecedented diversification and convergence across adjacent consulting segments and sectors. At the same time, digital transformation is driving hybrid business models with consulting, technology and managed service revenue. This change is fuelling high levels of M&A activity from trade and private equity investors, which we review in our 2017 M&A report. For owners considering selling their business, an appreciation of these trends is critical to uncovering the synergistic buyers that may offer the highest value.

Convergence between consulting offerings

Global consulting clients are increasingly looking to their advisors for best-in-class, end-to-end consulting solutions. These trends are driving established consulting buyers to use M&A to enter new geographies and acquire complementary capabilities.

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Private Equity firms demonstrate strong demand for consulting businesses

Eight mistakes when building a sale-ready business

By Alex White, Managing Director, Head of M&A and Strategic Advisory  Europe, 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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Equiteq advises P2 Consulting on MBO led by Lonsdale Capital Partners

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Equiteq is pleased to announce that it has advised its client P2 Consulting on a management buyout led by the existing management team and supported by Lonsdale Capital Partners. Equiteq acted as exclusive financial advisor to P2 Consulting. The transaction closed on December 23, 2016.

London headquartered P2 provides senior project management support to international blue chip clients that are undertaking significant change initiatives. P2 has grown significantly year-on-year since being established in 2013 and currently generates revenues of around £10m, principally from clients in the financial services and consumer/retail sectors.

With Lonsdale’s investment and wider support, P2 intends to accelerate its growth by expanding into new sectors and geographies, and capitalizing on attractive acquisition opportunities in a fragmented space. P2 is aiming to continue its impressive growth trajectory and realize its ambition to become the world’s leading brand in project and programme management.

Pip Peel, Founder of P2 Consulting, said “Given their consulting sector M&A experience, Equiteq was the natural choice for us when we started to explore options for the business. Equiteq ran a comprehensive process and, guided by them, we concluded that a private equity backed MBO would give the best outcome to shareholders, management and the company going forward. Equiteq introduced Lonsdale and we immediately recognized their experience and the cultural fit would make them the ideal partner.”

To see the full press release, please click here.

To see all our deals, please click here.

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Equiteq advises HS2 Solutions on its investment from Mountaingate Capital

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Equiteq is pleased to announce that it has advised HS2 Solutions, Inc. (HS2), a full-service digital transformation agency offering a broad range of strategy, experience design, development, analytics, and marketing execution services to help clients address their digital priorities, on an investment from Mountaingate Capital (Mountaingate), a Denver-based private equity firm. The transaction closed on November 1, 2016.

Colton King, Managing Director of Mountaingate, said “We are thrilled that Phil and Keith have selected Mountaingate to be their partner; the market opportunity for digital transformation agencies such as HS2 with a value proposition centered on customer experience is very compelling.”

Phil Hollyer, CEO and Co-Founder of HS2, said “Mountaingate brings a unique market perspective stemming from their extensive digital agency services investment experience that will be invaluable as we look to prioritize strategic investments to accelerate our growth and better serve our clients.”

Phil Hollyer said “We initially hired Equiteq to assess the value and market attractiveness of our business. Given their IT and marketing services industry focus and M&A advisory expertise, Equiteq was the logical choice to be our exclusive advisor for the overall process. Equiteq orchestrated a comprehensive and engaging transaction process, demonstrating a keen understanding of the buyer / investor landscape and providing us with sound advice every step of the way. The process led to a handful of transaction pathways to choose from, and Equiteq came through on their value promise and their commitment to delivering a successful transaction outcome.”

To see the full press release, please click here.

To see all our deals, please click here.

Registering free for Equiteq Edge will allow you to access content and insight to help you prepare your business for sale or sell your business

Should you sell to a private equity buyer?

Eight mistakes when building a sale-ready business

Private equity (PE) – or financial – buyers differ from trade buyers in that the former acquire strictly to make a return on their invested equity. Trade buyers (also referred to as strategic buyers) acquire to realize long-term strategic value by combining the two firms. Because of this, PE buyers will look for specific traits in a target and selling to a PE buyer will have different implications for a consultancy than selling to a trade buyer.

To make a return on their invested equity, PE buyers look for a company that has value enhancement potential and acquire it at a favorable price with financing. With consultancies, they are attracted by the relatively high profit margins compared to other industries, high levels of profit to cash conversion, the potential for high growth if a consultancy is in a hot sector, and the barriers to entry that can be maintained if proprietary expertise is retained and leveraged through intellectual property.

Conversely, returns can be risky since the company’s core assets (people) can walk out the door. And since most consulting work is project based, future forecasts are difficult to predict. Nevertheless, PE firms that focus on knowledge-based businesses know what to look for and will carefully consider investing in consulting firms to complement one of their existing businesses or as a standalone investment.

Once acquired, they enhance the value of the firm during the ownership period through a variety of ways such as: providing the capital to fund investment in the business for organic or acquisitive growth; strategic advice through board membership; and providing market access through relationships and potentially through other businesses in their portfolios that can help smooth entry into new markets or geographies.

PE owners then exit their investment after a period of growth (typically 3–5 years) at a higher price than their entry point. Sometimes this is through an initial public offering, but far more commonly it is through selling the firm to a trade buyer.

The advantages of being acquired by a PE buyer as opposed to a trade buyer is that your firm remains independent, your identity and brand will continue unaffected and you retain more operational control than if you had been bought by a corporate buyer. PE buyers can also offer more flexible deal structures, which provide greater options for sellers in terms of liquidity and taking money off the table. Although in their initial acquisition consideration PE buyers do not have synergies that enable a higher purchase price, they often have a more rapid value creation plan than most strategic buyers, which can enable them to be competitive on pricing.

However, there are also some important considerations that may not be as favorable. PE ownership typically involves majority control of your firm and a seat at the board. So although your firm will remain independent, the PE owner typically has significant influence on the direction of growth and key strategic decisions. As your firm is expected to grow rapidly, the pace of change will need to be managed carefully to avoid attrition of your staff and to retain the culture, which remains an important element of people-based firms. Furthermore, your payout as an owner staying with the firm may be staggered: one at the point of initial investment and a bigger payout after the PE firm exits its investment, since the focus in the interim will be on growing significant value in your firm. So you effectively have a bigger second bite of the apple in payout terms.

In a competitive sale process, PE buyers will be quicker to act and meet with you than other strategic buyers, as they are constantly sourcing firms in the market. Strategic buyers will take longer to consider the potential fit and only selectively meet with the right acquisition target firms. Sellers should take this into consideration when in a competitive process.

As future potential owners, you will need to see PE buyers as a growth partner. All parties will have skin in the game, so if your strategy is realized all will remain happy, but if growth stagnates or starts to decline, be prepared to be put under a microscope.

NB: The term ‘trade buyer’ refers to those who acquire for strategic purposes and includes in it our definition of consulting and corporate buyers.

This blog is condensed from a more in-depth article that you access here.

If you are preparing to sell your consulting firm and would like to discuss your plans, please get in touch.

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