Mid-Year Report to end June 2013

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Mid-Year Report

Global Consulting Mergers and Acquisitions

02

Global Consulting Mergers and Acquisitions Mid-Year Report to end June 2013

Mid-Year Report 2013

Equiteq produces a comprehensive annual report on the global M&A market for consulting businesses. This document is a mid-year update and should be read in conjunction with the full report for details and definitions. It can be downloaded from www.equiteq.com/report M A R K E T C O M M E N TA RY

In summary, deal volumes are down, but revenue multiples are holding up. Why this inconsistency? Buyers are more selective in their acquisitions and more diligent in the closing of a deal, thus extending the length of the process. Our market activities show no evidence of a decrease in buyer demand, quite the reverse. The revenue multiple is holding because quality firms are hard to find, but in demand. From a seller’s perspective, if a firm has specialist characteristics, good growth history and a robust future forecast, then it will command a premium price. The 12 month moving average is 8% down, from 204 deals per month at the end of 2012 to 188 at the end of June. This drop is consistent with M&A activity in other industrial sectors and not unique to consulting. Figure 1

Deal Volumes per Month, 12 Month Moving Average, 2005 – H1 2013

350

250 200 150 Number of Deals

100 50

12 Month Moving Average

Apr 13 June 13

Jan 2013

Jul 12

Oct 12

Apr 12

Jan 2012

Jul 11

Oct 11

Apr 11

Jan 2011

Jul 10

Oct 10

Apr 10

Jan 2010

Jul 09

Oct 09

Apr 09

Jan 2009

Jul 08

Oct 08

Apr 08

Jan 2008

Jul 07

Oct 07

Apr 07

Jan 2007

Jul 06

Oct 06

Apr 06

Jan 2006

Jul 05

Oct 05

Apr 05

0

Jan 2005

Deals per month

300

2005 to 2013

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Global Consulting Mergers and Acquisitions Mid-Year Report to end June 2013

Mid-Year Report 2013

M&A Mid-Year Report 2013

The fall is not in just one consulting sector, but consistent across them all when we compare with the first half of 2012. When viewed by region, Europe shows the greatest fall, with North America showing signs of the earlier US economic recovery. Figure 3 Deal Volumes by Region, H1 2012 and H1 2013

Figure 2 Deal Volumes by Sector, H1 2012 and H1 2013 350 300

282

264

266

256 226

200

600

279

500

207 173

150

137 100

Number of Deals

Number Deals

250

315

400

0

2012

IT Services 2013

Media

215 177

0

HR

394

200 100

Engineering

489

300

50

Management Consulting

510

496

39 Europe

North America

Aisia Pacific 2012

2013

Whilst volumes may have softened, indications are that values are maintaining strength, with an 11% rise in the revenue multiple across all sectors.

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25

Africa

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32

28

South America

04

Global Consulting Mergers and Acquisitions Mid-Year Report to end June 2013

Mid-Year Report 2013

M&A Mid-Year Report 2013

Figure 4 Revenue Multiples, all Sectors, 12 Month Rolling Median, 2009 – H1 2013 1.1

Revenue Multiple

1 0.9 0.8 0.7 0.6 0.5

May 13 June 13

Jan 2013

March 13

Nov 12

July 12

Sept 12

May 12

Jan 2012

March 12

Nov 11

July 11

Sept 11

May 11

Jan 2011

March 11

Nov 10

July 10

Sept 10

May 10

Jan 2010

March 10

Nov 09

July 09

Sept 09

May 09

Jan 2009

March 09

0.4

2009 to 2013

The deal value rise is reflected in the value of shares in listed consulting businesses, where we see an increase in valuations as a multiple of revenue in all sectors other than engineering. Figure 5 Share Price Revenue Multiples by Sector 1.2

Revenue Multiple

1.0

1.09 1.13 0.94

0.8

0.82

0.6

0.48 0.44

0.4

0.50

0.58

0.65 0.66

0.2

2012

0

2013 Management Consulting

Engineering

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HR

IT Services

Media

www.equiteq.com

05

Global Consulting Mergers and Acquisitions Mid-Year Report to end June 2013

Target Issuer

Target Description

Buyers Investors

Deal Value $m

Revenue Multiple

Clear Task, Inc. (USA)

Engages in implementing and customizing Salesforce.com products

Perficient Inc. (USA)

12

1.45

Energy Information Centre Ltd (UK)

Provides energy market information and consultancy services

Utilitywise Plc (UK)

28

2.58

Sempla Srl (Italy)

Offers information technology consulting, program management, interactive design, process and system design, and outsourcing services

GFT Holding Italy S.r.l. (Italy)

29

0.54

Morse Spain SL and Morse Computer Group Limited and 2e2 Guernsey Limited and Business in Netherlands (Ireland)

Provide ICT lifecycle services on premises in the cloud, hosted, as a managed service, and as a hybrid

Logicalis Group Limited (UK)

31

0.21

Amaze Limited (UK)

Operates as a digital marketing and technology company

St Ives Marketing Services Limited (UK)

37

1.45

Branded3 Search Limited (UK)

Operates as an integrated digital marketing and search engine optimization (SEO) agency

St Ives plc (UK)

38

6.10

CapitalStream, Inc. (USA)

Provides software and consulting services in the United States

Linedata Services SA (France)

45

1.50

FishNet Consulting, Inc. (USA)

Provides information security solutions for businesses in the United States

Investcorp Bank B.S.C. (Bahrain)

200

JACAM Chemicals, LLC (USA)

A testing laboratory, offers research services to diagnose field problems for petrochemical industry

Canadian Energy Services & Technology Corp. (Canada)

240

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2.47

Mid-Year Report 2013

Sample deals completed in H1 2013

06

Global Consulting Mergers and Acquisitions Mid-Year Report to end June 2013

Target Issuer

Target Description

Buyers Investors

Deal Value $m

Revenue Multiple

CSS Corporation (USA)

An information and communications technology company

Partners Group (Switzerland)

270

1.3

Acquity Group Limited (Hong Kong)

Provides brand e-commerce and digital marketing services in the United States

Accenture Holdings B.V. (Netherlands)

316

2.03

RepconStrickland, Inc. (USA)

Provides recurring turnaround and specialty services to refinery, and other process industries

EMCOR Group Inc. (USA)

455

1.14

Intelligence, Ltd. (Japan)

Provides human resource services in Japan and internationally

Temp Holdings Co., Ltd. (Japan)

745

0.97

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Mid-Year Report 2013

Sample deals completed in H1 2013

07

The Global Consulting Mergers & Acquisitions - Interim Report, June 2013

Further Resources

The Global Consulting Mergers & Acquisition Report 2013 This market trend report is for people involved in the running of a consultancy business and looking to sell and/or acquire. Download for free at www.equiteq.com/Report

100 Tips for Consulting Firms to Accelerate Profit and Value Growth This guide contains practical tips to build sustainable growth in cash flow, profit and equity value. Download for free at www.equiteq.com/100ConsultingGrowthTips

Equity Growth Accelerator Create a clear direction for your firm with a prioritised and quantified growth plan using the ‘8 levers of Equity Value’ and 80 best practice operating metrics. Download the briefing pack at www.equiteq.com/EGA

Valuation and Market Risk Assessment

100 Tips for Consulting firms to accelerate profit and value growth

Read Immediately and pass on to your colleagues

Growing & realising equity value in consulting firms

Get a robust valuation of your firm and a thorough risk assessment before you put your business up for sale. It enables you to plug the gaps before you enter buyer due diligence and produces a substantiated valuation that will not be undermined. Find out more at www.equiteq.com/Valuation

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Mid-Year Report

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