IT Services M&A trends

By Ramone Param, Associate Director, Equiteq.

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.

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International firms tap into Asia-Pacific markets with strategic acquisitions of specialist firms

Equiteq’s David Jorgenson and Jean-Louis Michelet met at ESSEC Business School in Singapore to discuss the opportunities and challenges impacting M&A activities in the Asia-Pacific region.


In this blog, the final part of their discussion, they both explore the huge opportunities for knowledge-driven services businesses in the Asia-Pacific region.

Simply put, there are massive opportunities in Asia-Pacific for knowledge-driven B2B services companies. While most of the region’s services markets are not as advanced as in more developed economies in Europe and North America, globalization and technological revolution are driving international demand for specialist businesses in Asia-Pacific.

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Lift & Shift: following the rise to cloud migration

For every consultant who spotted the cloud opportunity and raced to embrace it, there will be another who is still not quite fully convinced.

Clients have spent hundreds of thousands – or even millions – on their on-premise solutions, they are comfortable with their data centres and have established long-term relationships with their maintenance engineers. They’re not ready to give all that up in one go. And, as long they resist a wholesale move to cloud, there’s a role for IT consultants and specialists to offer support for these traditional models.

But the pace of change is quickening; clients have tuned in to piecemeal migration and with software vendor innovation being cloud-focused, the largest traditional consulting firms have seen the writing on the wall, turning to mergers and acquisitions (M&A) as the only credible way of rapidly building their cloud capability.

Shaun Fröhlich is UK managing partner of Incredibleresults, and works with leadership teams to accelerate value growth.

“We are all on a spectrum,” he says. “Many believe the world is changing because of the cloud and it is spurring them on to cash in their chips on their existing business, but there is an almost equal number that remain neutral and see it as an evolution, not reason to trigger a capital event.”

Despite the cloud offering faster, less disruptive deployment and easier global enablement – while cyber-security concerns have increasingly been addressed – migration to the cloud isn’t yet wholesale for most organizations.

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The world is now ‘on demand’, but why are so many back offices still living in the past?

Blog photo back officefinalll

This week we have a guest blog from Mark Robinson, who has founded and sold several consultancies. His latest venture is professional services automation specialist, Kimble Applications, of which he is a co-founder.

Twenty or 30 years ago we organized our lives around how the world worked. We worked 9-5 because we had to be in the office to get work done, we sat down to watch a certain TV show at a certain time because that was the only chance we’d have to view it and we picked up a paper in the morning to get our news fix as that’s how we kept up with current events. That already seems like a long time ago now doesn’t it? These days we have flexible working, we can catch up on TV shows when and where it suits us and we can get a constant feed of news through our mobile phones. This has all been enabled through technology. But one area which has yet to embrace this new way of working is the back office.

Today, the back office is much the same as it’s been for decades. Invoicing is done at month end, as are payment runs and expenses, which are often physically uploaded, checked, approved and forwarded to finance. Resource planning is based on imperfect forecasting, often using a range of spreadsheets and a finger in the wind approach. Timesheets can take weeks to verify, leaving consultancy owners with little idea of how they are performing against budgets. This all adds up to challenges for any management team who wants to know how the business is doing at that exact point in time, as they have no idea how accurate or up to date the information they are using is. Imagine how much more quickly you could grow your consultancy if you had on demand information that showed you how the business was doing right then, allowing you to fix any problems much earlier and make decisions faster that improve your company performance.

That the back office is so behind is even more surprising given that we now accept that front offices need to function ‘on demand’. We know consultancies have to be responsive to clients’ requests and needs, so why are we leaving the back office wallowing in the past when they should be joined up with the front office and just as responsive?

The fact is that we now have the technology to make the back office on demand, which can bring huge benefits to consultancies. Rather than running a variety of untrustworthy spreadsheets or old fashioned packages, the correctly designed cloud application means that we can have a single, unifying system based around the processes the cloud enables into which we enter information as it happens and access from anywhere. This destroys the silos that previously existed between departments. From senior management, sales people, project managers, consultants and associates, every time anyone changed anything, the overall performance reporting would be updated across the system in real-time, so that whenever you looked at the information on the system, you know it’s completely accurate and a snapshot of where the business is at that time.

A client (or you, for that matter) wants to know what the status of a project is, how much time and money has been spent on it? They don’t have to wait until the next reporting run: you can tell them instantly. You’d be able to enter and approve expenses and timesheets from anywhere, at any time, and from any device. You’d know what capacity and skillsets you have on the bench at any given moment, and for how long, allowing better resource planning and pursuit of new business.

And alongside all of this, everyone in the business would have the same level or clarity meaning every employee understands how their actions can impact the business, empowering them to make a real difference to the growth of the consultancy.

And professional services automation (PSA) tools make a huge difference to the bottom line too. Invoices can be produced more quickly and are error-free, meaning they get paid more quickly, improving the company’s cashflow. Because much of the work is now automated, this frees up the back office to concentrate on more added-value work, meaning companies can grow without having to increase the headcount of non-revenue generating staff. Service Performance Insight is a global research, consulting and training organization dedicated to helping professional service organizations make quantum improvements in productivity and profit. Its last benchmark found that firms using PSA software saw more than a 6% increase in their billable resource utilization. On average, firms using PSA earned an extra $11,000 of revenue per consultant than those that have yet to adopt it and enjoy nearly 75% stronger profit margins as measured by EBITDA.

This technology is with us now. It’s time for consultancies to move their back offices from the past and into the on demand present. Just because it’s the way we’ve always done it, it doesn’t mean it’s the way we should continue to work.

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