Report 2013

G R O W I N G & R E A L I S I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S © Copyright Equiteq LLP 2013

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2013

The Global Consulting Mergers & Acquisitions

Welcome to the Equiteq Global Consulting Mergers & Acquisitions Market Report 2013 This market trend report is aimed primarily at shareholders, prospective shareholders, investors and corporate development executives in the consulting industry. If you are involved in the running of a consultancy business, or looking to sell and/or acquire, or just interested in valuations and market trends, then read on …

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02

Covering Europe, North America and Asia Pacific

Contents The Global Consulting M&A Report 2013

List of Charts

3

Asia Pacific Overview

45

Introduction

6

South America Overview

48

Definitions of Consulting Sectors

7

Africa Overview

50

Commentary on the Market

8

Stock Market Review

52

9

Further Resources

54

Deal Volumes Regions

10

About Equiteq

55

Target and Bidder Countries

11

Disclaimer

57

Buyers

14

Values and Multiples

15

Deal Values

18

Deal Structures

19

Outlook and Implications for Sellers

21

IT Consulting

22

Management Consulting

26

Media Consulting

31

Engineering Consulting

34

Human Resource Consulting

37

North America Overview

40

Europe Overview

42

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03

The Global Consulting M&A Report 2013

List of Charts The Global Consulting M&A Report 2013

Figure 1 Index of Key Market Indicators by Year

8

Figure 20 IT Consulting EBITDA Multiples

24

Figure 2 Deal Volumes per Month

9

Figure 21 Annual Deals by Technology Platform

25

Figure 3 Deal Volumes by Region

10

Figure 22 Management Consulting Deals per Year

26

Figure 4 Deal Volumes by Region by Year

10

Figure 23 Management Consulting Deals per Month

27

Figure 5 Proportion of Buyers from Outside Country 11

Figure 24 Management Consulting Revenue Multiples

27

Figure 6 Proportion of 'External Buyers'

12

Figure 25 Management Consulting EBITDA Multiples

28

Figure 7 Deals by Target and Bidder Country, 2012

13

Figure 26 Proportion of Deals Related to Healthcare

29

Figure 8 Top 12 Buyers of Consulting Companies, 2012 14

Figure 27 Big-5 Accountancy Firm Acquisitions

30

Figure 9 Financial Buyers, as a Proportion of Deals

Figure 28 Media Deals per Year

31

Figure 10 Revenue Multiples by Sector, 2011 and 2012 15

Figure 29 Media Deals per Month

32

Figure 11 Sector Profitability and Deal Multiples

16

Figure 30 Media Revenue Multiples

32

Figure 12 Range of Revenue Multiples

16

Figure 31 Media EBITDA Multiples

33

Figure 13 Revenue Multiples by Region by Year

17

Figure 32 Engineering Deals per Year

34

Figure 14 EBITDA Multiples, 12 Month Rolling Median

18

Figure 33 Engineering Deals per Month

35

Figure 15 Deal Value Range, 2012

18

Figure 34 Engineering Revenue Multiples

35

Figure 16 Deal Structures

20

Figure 35 Engineering EBITDA Multiples

36

Figure 17 IT Consulting Deals per Year

22

Figure 36 Deals Related to Environment and Energy

36

Figure 18 IT Consulting Deals per Month

23

Figure 37 HR Consulting Deals per Year

37

Figure 19 IT Consulting Revenue Multiples

24

Figure 38 HR Consulting Deals per Month

38

15

04

Covering Europe, North America and Asia Pacific

Figure 39 HR Consulting Revenue Multiples

39

Figure 58 Share Price Revenue Multiples by Sector

52

Figure 40 HR Consulting EBITDA Multiples

39

Figure 59 Share Price EBITDA Multiples by Sector

53

Figure 41 Deals in North America by Year

40

Figure 60 Share-Price Index, 4-year Trend

53

Figure 42 Revenue Multiples in North America

40

Figure 61 Equiteq Valuation Model

55

Figure 43 Deals in North America per Month

41

Figure 62 Equiteq Growth Wheel

56

Figure 44 EBITDA Multiples in North America

41

Figure 63 Synergy Cube

56

Figure 45 Deals in Europe by Year

42

Figure 46 Deals in Europe per Month

43

Figure 47 Revenue Multiples in Europe

43

Figure 48 EBITDA Multiples in Europe

44

Figure 49 Deals in Asia Pacific by Year

45

Figure 50 Deals in Asia Pacific per Month

46

Figure 51 Revenue Multiples in Asia Pacific .

46

Figure 52 EBITDA Multiples in Asia Pacific

47

Figure 53 Deals in South America by Year

48

Figure 54 Revenue Multiples in South America

49

Figure 55 EBITDA Multiples in South America

49

Figure 56 Deals in Africa by Year

50

Figure 57 Revenue Multiples in Africa

51

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06

Covering Europe, North America and Asia Pacific

Introduction

This is the seventh year that we have published the only publicly available information on the Global Consulting M&A market. It covers consulting companies across all major industry segments including; management consulting, engineering, HR services, IT services and media consultants. (See page 7 for sector definitions.). Equiteq’s primary mission is to deliver strategic growth advice and complete successful M&A transactions for our clients. This report has been produced by Equiteq’s Research department, whose job is to keep Equiteq and its clients ahead of the intelligence curve, through comprehensive data capture, synthesis and analysis. While our market research work is there to support our business activities, we are glad to share this aggregate view with our community of interest. To reflect Equiteq’s growing global work with clients across all continents, we have included all regions in the data and reported local differences. We have also extended our dataset which allows us to improve the quality and depth of our report. For this reason, you may see some slightly varying views on the data compared with previous reports. In particular, we begin with a consolidated view of all sectors, before looking at each in more detail. This year we have again included our review of stock prices within the industry. We have noticed that references to quoted company multiples continue to be used by buyers and sellers in valuations, and so the indices can act as good benchmarks and perhaps even lead indicators on the state of the M&A market. In fact, as buyers are often quoted companies, this can offer very useful insight. The report is aimed primarily at shareholders, prospective shareholders, investors and corporate development executives in the consulting industry. If you are involved in the running of a consultancy business, or looking to sell and/or acquire, or just interested in valuations and market trends, then read on. Finally, a short disclaimer! Despite our diligence in compiling this information we can’t be responsible for how you use it. Remember a sale is only achieved when willing buyer meets willing seller and agrees terms!

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07

The Global Consulting M&A Report 2013

Definitions of Consulting Sectors

This year Equiteq has segmented the data and produced specific analysis for five consulting sub-sectors. The segmentation we have used is defined as follows. They are also colour coded to help you navigate these sections in the report. IT Consulting

• Change management

Engineering Consulting

Companies in this sector offer IT consulting, design, implementation and maintenance services at the application and device level, transcending enterprise, mobile, digital and cloud technologies, including:

• Operational performance improvement

Firms involved in professional engineering services within the building or infrastructure environment, or transportation, or industrials like energy (nuclear, oil and gas etc), aerospace, automotive. This includes:

• Requirements planning • Enterprise Resource Planning automation • IT project management • Applications design and development • Analytics • Information security systems implementation • Business Intelligence automation • Systems integration • Software training • Enterprise Performance Management automation • Technical support and outsourcing • IT Strategy and Implementation

Management Consulting Firms engaged in business performance improvement consulting at the strategic or operational levels of business processes, including: • Strategy advice or implementation

• Project and programme management • Human capital and organisational development • Financial business advisory

Media Consulting Firms in this space cover all the main disciplines at the execution end of the marketing process , including: • Brand design agencies • Online and offline PR and reputation management • Corporate website design, ecommerce and portals • Social media services • Online marketing, search engine optimization

• Architecture, surveying and building design services • Project management • Environmental engineering • Risk assessment and audit • Energy and renewable energy • Security • Pipeline engineering

Human Resource Consulting These are firms primarily engaged in recruitment, staffing and training, including: • Recruitment agencies

• Loyalty marketing services

• Recruitment processes or outsourcing

• Digital and media advertising agencies

• Executive search and selection

• Consumer insights and analytics, online and offline

• Professional training and education

• Email marketing

• Outplacement services

• Usability testing and benchmarking

• HR management services

• Customer Management and Experience

• Employee benefits consulting

• Marketing and brand strategy

• Recruitment processes or outsourcing

• Staffing agencies providing contractors

08

Covering Europe, North America and Asia Pacific

Commentary on the Market

In 2012, overall M&A activity saw a significant turndown of 6.4% across all industries and geographies. Early high expectations were dampened with the news of ‘fiscal cliffs’, ‘triple-dip recessions’ and Chinese growth slow-downs. Figure 1 Index of Key Market Indicators by Year

Relative Index, 2006 =100

130 120

Revenue Multiple

110

Volume

100

EBITDA Multiple

90 80 70 60 50 40

2006

2007

2008

2009

2010

2011

2012

Within the consulting and professionals services sector a similar picture was seen, with deal volumes falling by 7.3%. The key indicators on value and volume reversed their upward growth of 2010 and 2011, with volumes and multiples all falling.

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09

The Global Consulting M&A Report 2013

Commentary on the Market Deal Volumes

D E A L VO L U M E S

The market looked strong in early 2012, with volumes holding at previous levels. However, the third and fourth quarters saw monthly volumes fall by around 12.2% compared to first half of 2012, no doubt due to the influence of economic turmoils. Deal volumes in 2012 remain 21% below the 2007 peak. Figure 2

Deal Volumes per Month, 12 Month Moving Average, 2005 – 2012

350

250 200 150 100

Number of Deals

50

12 Month Moving Average

2005 to 2012

Jul 12

Oct 12 Dec 12

Apr 12

Oct 11

Jan 2012

Jul 11

Apr 11

Jan 2011

Jul 10

Oct 10

Apr 10

Oct 09

Jan 2010

Jul 09

Apr 09

Jan 2009

Jul 08

Oct 08

Apr 08

Oct 07

Jan 2008

Jul 07

Apr 07

Jan 2007

Jul 06

Oct 06

Apr 06

Oct 05

Jan 2006

Jul 05

Apr 05

0

Jan 2005

Deals per month

300

10

Covering Europe, North America and Asia Pacific

Commentary on the Market Regions

REGIONS

In the global consulting market, North America continues to dominate with 41% of the deals, an increase of 3% from 2011. Noticeably, we see a rising role of African and South American regions, which both increased their shares from 2% of total deals to 3% each. Overall, deal volumes were down by 7.3% in 2012.

Figure 3

Deal Volumes by Region

The greatest fall was in Europe of 15%, while North

3%

America showed positive signs with a 1.4% increase.

15%

This is in contrast to 2011, when Europe grew by 10%. Since 2007, the slowest deal volume recovery

41%

was seen in Europe.

3% South America

38%

Africa Aisa / Pacific USA / Canada Europe

Figure 4

Deal Volumes by Region by Year

3500 3000

Number of deals

2500 2000 1500

South America Africa

1000

Aisa / Pacific 500

USA / Canada

0

Europe 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

2012

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11

The Global Consulting M&A Report 2013

Commentary on the Market Target and Bidder Countries

TA R G E T A N D B I D D E R C O U N T R I E S

Generally speaking, the larger the country’s economy, the larger it’s volume of deals and the lower it’s proportion of foreign buyers. The fraction of buyers from outside a country stayed at 22%, the same as 2011, which is lower than the average of 24% during the 2005-2011 periods. If we exclude the US, the 2012 proportion would increase to 29%, as only 7% of the buyers came from outside of it. This would reduce the proportion of global deals that can be considered to be cross-border because more than a third of deals (38%) were in the United States. Figure 5

Proportion of Buyers from Outside Country (Top 12 Target Countries)

Bidders from Outside

35% 30% 25%

28%

30%

Spain

Australia

Canada

32%

33%

21%

15%

16%

10% 5%

27%

24%

20%

29%

10%

11%

France

Japan

7%

0% USA

Finland

United Kingdom

Russia

Sweden

Germany Netherlands

Top 12 Countries

It is worth pointing out here that the numbers of ‘internal’ buyers is driven by the volume of small sales. As the deal size increases, the proportion of external buyers rises.

12

Covering Europe, North America and Asia Pacific

Commentary on the Market

Figure 6

Proportion of 'External Buyers' Relative to Size of Deal

Proportion of ‘Outside’ Buyers

70% 67%

60% 50% 40%

40%

30% 20%

39%

38%

38%

$30m to $50m

$50m to $100m

$100m to $500m

33% 26% 20%

10% 0% $0m to $5m

$5m to $10m

$10m to $20m

$20m to $30m Deal Size

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over $500m

13

The Global Consulting M&A Report 2013

Commentary on the Market

Figure 7

Deals by Target and Bidder Country, 2012

Target Country

1 1

1

1 42

2

1

2

30

2 1

3

1

1

1 2

2 3

4

897 281 101 76 76 74 65 50 49 41 41 37 34 29 29 29 28 28 23 23 21 19 18 19 16 11 5 9 6 8 7

8

224

1 1 1

2

1

1 1

1

1 1

2

2

2 1

1

1

16

1

1

1

28 1 21 1 4

21

1 1

1

1

1 2

2 5 3 1

3 17

1

18

2

16 3

1

13

14 2

1 3

1 1

7

18 8 1

1 10

2

1

1 15 12

1

2 1

1

1

1 5 5 3 2

1 1 2 1 47

2 1 41 30 28

1 1 1 3 28 26 26 24

2 2 23 22 22

1 19 18

1 18 14

13 13

1 13 11

Total all Countries

Other

Hong Kong

4 2

Brazil

1

United Arab Emirates

1 1

1

New Zealand

South Africa

China

South Korea

Malaysia

Italy

3

Ireland

2 1

Belgium

1 3 1 2 2 1 1

India

1

Singapore

1 1

Switzerland

Denmark

Norway

Russia

Sweden

1

Spain

United States 836 14 5 14 3 2 4 1 United Kingdom 22 223 5 4 5 2 5 France 4 1 91 1 1 Canada 15 3 1 53 1 Germany 7 1 5 52 1 Japan 3 3 1 66 Australia 6 3 1 1 46 Finland 1 3 Netherlands 6 4 1 33 Sweden 2 1 1 1 India 10 1 2 1 2 1 Russia 3 1 Brazil 6 1 2 1 1 2 1 1 Spain 1 1 2 China 8 2 1 Norway 1 South Africa 2 3 2 1 Italy 3 2 1 1 Denmark 1 2 Malaysia 1 1 Belgium 4 6 1 Switzerland 4 1 3 1 Singapore 2 1 1 2 South Korea 2 New Zealand 1 2 Hong Kong 1 1 Austria 3 Turkey 1 3 1 Chile 3 2 Ireland 1 1 1 2 1 United Arab Emirates 1 2 Other 12 6 5 4 1 1 2 2 Total all Countries 959 284 130 79 79 76 64 54

Finland

Netherlands

Australia

Japan

Germany

Canada

France

United Kingdom

Bidder Country

United States

63% of worldwide deals in our selected consulting services were done by 5 countries: USA, UK, France, Canada and Germany.

14

Covering Europe, North America and Asia Pacific

Commentary on the Market Buyers

BUYERS

In 2012 2,426 targets were bought by 1,984 different companies. By far the most prolific buyer was WPP, boasting a total acquisition count of in excess of 40; of which 20 were of consulting-type businesses. The second most active buyers were SGS SA. Operating globally in 10 segments almost all of their targets in 2012 were from different consulting sectors and regions. Elsewhere, notable activity was seen by the following companies: • Bureau Veritas SA: acquired companies in emerging regions such as Asia-Pacific and South America

• Cardno: continuing in its inorganic growth path • GENIVAR Inc: tripled its revenues through the acquisition of WSP Group

• Eurofins Scientific SA: acquired environmental testing and laboratory service companies • Underwriters Laboratories Inc: focused on inspection / testing companies and IT services companies • All Covered (a subsidiary of Konica Minolta): continued to acquire and proactively advertise

• Arthur J Gallagher: consistently buying small employment benefit consultancies • Capita PLC: has been steadily growing its consulting practice • Arrow Electronics: have been expanding their component legacy into various IT services

• Acosta: acquiring value-add consulting businesses

WPP plc

20 10

SGS SA

10

Bureau Veritas SA 9

Eurofins Scientific SA Underwriters Laboratories Inc

7

All Coverd, Inc

7

Acosta, Inc

6

Cardno Limited

6

Arthur J Gallagher & Co

6

GENIVAR Inc

5

Capita PLC

5

Arrow Electronics, Inc.

5

Number of deals done 0

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5

Figure 8 Top 12 Buyers of Consulting Companies, 2012 Note: Numbers only include acquisitions categorized in these sectors. 10

15

20

25

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15

The Global Consulting M&A Report 2013

Commentary on the Market Buyers / Values and Multiples

Figure 9

Financial Buyers, as a Proportion of Deals

Financial buyers, %

10% 8%

9.2%

9.1%

8.3%

7.9%

6%

6.4%

6.7%

6.6%

2009

2010

2011

7.2%

4% 2% 0% 2005

2006

2007

2008

2012

Deal Size

The decline matches what we have seen in previous reports but the proportion is lower here, as we have included a far greater number of deals in our data set; including small deals where there is less likely to be a financial buyer. VA L U E S A N D M U LT I P L E S

There are significant differences in the revenue multiples in each sector which are all driven by the average underlying profitability. In most sectors, except IT, the revenue multiples fell during the year. Figure 10 Revenue Multiples by Sector, 2011 and 2012

1.2

Revenue Multiple

1.0

1.14

1.09 0.99

0.91

0.8

0.71

0.6

0.82

0.76

0.72

0.64 0.49

0.4 0.2

2011

0

2012 Management Consulting

Engineering

HR

IT Services

Media

16

Covering Europe, North America and Asia Pacific

Commentary on the Market

When using these revenue multiples to estimate the value of a business, remember that they are an average of many deals, ranging from really high-value businesses through to rushed sales at the point of bankruptcy. Whilst the mid-point of deal values is around 1.0 in Management Consulting, there are plenty of strong companies selling in the range from 1 up to 2, and above. Figure 11

Sector Profitability and Deal Multiples

Sector profitability - % EBITDA

14% Management Consulting

12% Media 10%

IT Services

8% Engineering

6% HR

4% 2% 0%

0.4

0.5

0.7 0.8 Deal Revenue Multiple

0.9

1.0

1.1

Range of Revenue Multiples (Management Consulting)

16%

100%

14%

90% 80%

12%

70%

10%

60%

8%

50%

6%

40% 30%

4%

20%

2%

10% 0%

0% 0

0.25

0.5

© Copyright Equiteq LLP 2013

0.75

1

1.25 1.5 1.75 2 Revenue Multiple (up to)

2.25

2.5

2.75

3

More

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Cumulative Deals

Proportion of Deals

Figure 12

0.6

Deals Done Cumulative Deals Done

17

The Global Consulting M&A Report 2013

Commentary on the Market

Figure 13

Revenue Multiples by Region by Year

1.1 1.06

1.0

Revenue Multiple

0.9

1.05 0.94

0 92 0.92 0.84

0.8 0.7

1.01 1 01

0.77

0.76

0.76 0.69 0.70

0.6

0.68 0.59

0.5

0.57

0.56

Europe USA / Canada

0.4

Asia / Pacific

0.3

Africa

0.2

South America 2010

2011

2012

Since 2010, in the Asia-Pacific and South American regions, the revenue multiples have decreased in comparison to Europe, North America and Africa. In 2012 there were decreases of 16% in Asia-Pacific and 5% in South America, whilst North America remained constant and Europe and Africa saw increases of 33% and 22% respectively. With regards to EBITDA multiples, these are invariably reported as being much higher than would normally be discussed in a valuation negotiation. This is because: • Private companies - the majority of deal targets – tend to under report profits • The figure used in the calculation tends to be a lower historical figure • Negotiations are around an inflated ‘adjusted’ profit All of which can contrive to increase the figure by 50% to 100%. Nevertheless, the trend can be illustrative, and the year-end saw a slight up-turn in multiples.

18

Covering Europe, North America and Asia Pacific

Commentary on the Market Deal Values

Figure 14

EBITDA Multiples, 12 Month Rolling Median

14

EBITDA Multiple

12 10 8 6 4 2

Nov 12

Sept 12

July 12

May 12

March 12

Nov 11

Jan 2012

Sept 11

July 11

May 11

March 11

Nov 10

Jan 2011

July 10

Sept 10

May 10

Jan 2010

March 10

Nov 09

July 09

Sept 09

May 09

Jan 2009

March 09

Nov 08

Sept 08

July 08

May 08

March 08

Jan 2008

0

2008 to 2012

The proportion of deals at the lower range remained similar to previous years, but the number of larger deals saw a 36% increase in the average deal value to $242m. This was pushed up by the high value deals in North America over $450m, whilst Europe was a far more modest $88m. Figure 15

Deal Value Range, 2012 100%

Proportion of Deals Done

30%

90% 25%

80% 70%

20%

60% 50%

15%

40%

10%

30%

5% 0% $0 to $1m

$1 to $3m

$3 to $5m

$5 to $10m

$10 to $20m

$20 to $30m

$30 to $40m

$40 $50 $100 to $50m to $100m to $500m

Over $500m

Deal Value Range, USD

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Frequency of Deals

20%

Cumulative Quantity

10% 0%

Cumulative Value

19

The Global Consulting M&A Report 2013

Commentary on the Market Deal Structures

DEAL STRUCTURES

When agreeing the terms of a deal, there are generally four key elements under consideration: • Amount of cash, both on completion and at agreed future dates • Equity stake in the acquiring company • Earn-out based on future performance, normally in cash • Changes in remuneration, particularly above-market salaries or equity-Partnership status in the acquirer As a rule-of-thumb, the seller generally gets 50% - 60% of the payment up-front, with the remainder as an earn-out over two or three years. Generally, the greater the value multiple a seller seeks to gain, the greater the proportion that will have to be at risk and hence the initial cash payment will be lower as a percentage of the total consideration. Whilst we obviously see the details behind multiple offers on sell-side and buy-side engagements, these are not often publicised in deal announcements. The chart below details some deal structures where these are available. We found that in 2012: • 41% of sample deals were fully paid by cash • 32% of deals paid by cash and earn-out • 21% by cash/equity • 6% by cash/equity/earn-out

20

Covering Europe, North America and Asia Pacific

Commentary on the Market E

Deal Structures – Mix of Up-Front and Earn-out Payments

Range of Deals

Figure 16

Up-Front Payment Earn-Out 0%

20%

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40%

60%

80%

100%

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21

The Global Consulting M&A Report 2013

Commentary on the Market Outlook and Implications for Sellers

O U T L O O K A N D I M P L I C AT I O N S F O R S E L L E R S I N 2 0 13

This time last year Equiteq forecast caution in the market and witnessed a decrease in volumes and values. From what we are seeing in the market and in conversations with many different buyers, we expect a small but steady upturn during 2013, with a return to volumes and values more in line with those realized in 2011. The large corporations have cash to buy, and the large services companies must grow to maintain their value and will use acquisitions as a route to that end. The fact that there may be a short-term redundancy programme of trimming ‘old’ skills is no reason why there will not be a simultaneous acquisition of new skills. However, what we are also seeing is a far more discerning buyer. ‘Generalists’ do not appeal to buyers, but ‘specialists’ do. Focus is absolutely paramount, not just in the service delivered and the sector served, but also in the level of geographical dispersion. If, as an owner of a consulting business you are seeking greater apparent security in diversifying into new markets or locations, you will be severely disadvantaging the potential sale-value of your company. We talk in the following sections about trends in what has been bought. However, the new areas we see being relevant in 2013 and repeatedly asked for by European and US buyers are a combination of interests in: • Geography: Asia and South America • Capabilities: Big Data and Analytics, Social Media and the Cloud • Focus: Healthcare and Regulatory

22

Covering Europe, North America and Asia Pacific

IT Consulting

In 2012 there were 604 deals (25% of all deals) associated with IT consulting companies. Within this sector, the deal volumes fell steadily through the year finishing down at 13%, a rate of below 50 deals per month. The values in terms of revenue and EBITDA multiples continued to recover, reflecting a steady increase since 2009. This in turn shows that many of the current in-demand service specialisms are within this sub-category. Figure 17

IT Consulting Deals per Year

900 800

802

Number of Deals

700 690

600 500

680

693

673

604

585

535

400 300 200 100 0 2005

© Copyright Equiteq LLP 2013

2006

2007

2008

2009

2010

2011

www.equiteq.com

2012

Oct 12 Dec 12

Jul 12

Apr 12

Jan 2012

Oct 11

Jul 11

Apr 11

Jan 2011

Oct 10

Jul 10

Apr 10

Jan 2010

Oct 09

Jul 09

Apr 09

Jan 2009

Oct 08

Jul 08

Apr 08

Jan 2008

Oct 07

Jul 07

Apr 07

Jan 2007

Oct 06

Jul 06

Apr 06

Jan 2006

Figure 18

Oct 05

Jul 05

Apr 05

Jan 2005

Number of deals per month

23 The Global Consulting M&A Report 2013

IT Consulting

IT Consulting Deals per Month

100

90

80

70

60

50

40

30

20

10 Number of Deals

0 12 Month Moving Average

24

Covering Europe, North America and Asia Pacific

IT Consulting

Figure 19

IT Consulting Revenue Multiples

1.0 0.94 Revenue Multiple

0.8

0.85

0.91 0.82

0.80

0.6

0.71

0.72

2010

2011

0.60

0.4 0.2 0 2005

Figure 20

2006

2007

2008

2009

2012

IT Consulting EBITDA Multiples

16

EBITDA Multiple

14

14.4

12

12.4 11.1

10

10.2

10.1 9.2

8

8.5

8.9

6 4 2 0 2005

2006

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2007

2008

2009

2010

2011

www.equiteq.com

2012

25

The Global Consulting M&A Report 2013

IT Consulting

There were no significant volume buyers in the IT consulting sector, though in the US, Perficient continued its prolific acquisition rate with three purchases, each around $10-15m in value. Other deals to note were: •CGI Group Holdings Europe Ltd and Logica PLC: the Canadian BPO business acquiring Logica plc was by far the largest deal in the sector •NTT DATA EUROPE GmbH and itelligence AG purchase of itelligence, the German SAP services provider that has itself been a prolific acquirer of businesses, including in 2013, picking up Blueprint Systems in the UK and Elsys in Turkey. •The other large SAP acquisition was Infosys Ltd and Lodestone Management Consultants AG purchase of the Swiss consultancy Lodestone which is possibly the last available player with a global footprint. Implementers of ERP systems continue to make up a large and constant proportion of deals. As a technology platform, SAP continued to be a component of many deals; along with Microsoft and Oracle (these deals cover the full range of products, not just ERP). Figure 21 Annual Deals by Technology Platform 70 66

Deals per Year

60

59

50 46

40

60

57 48

45

41

39

30

33 29

20

Oracle / PeopleSoft

21

10

Microsoft 27

0 2009

2010

2011

SAP

2012

At the other end of the spectrum we see virtually no deals for implementers of smaller systems such as Infor and Epicor, and none yet for NetSuite, the fast-growing cloud-based solution. In terms of other technology areas, Business Intelligence (BI) and Analytics continue to perform strongly, with cloud capability being a common attribute of target companies. Interestingly, we have yet to see any consolidation in the QlikView implementation partner space.

26

Covering Europe, North America and Asia Pacific

Management Consulting

The management consulting sector comprises 24% (575 deals) of the total deals in 2012. Within this sector we saw volumes fall by 4%, with a steady decline through the year to just under 50 deals per month. The softening of the market is reflected in the values, where the revenue multiples fell to just below the indicator of 1. EBITDA multiples (as reported) did rise to just under 10, but this is most likely a reflection of the low historical profitability used in the calculation. Figure 22

Management Consulting Deals per Year

900 800 772

Number of Deals

700 600

727

624 559

500 400

619

594

575

438

300 200 100 0 2005

© Copyright Equiteq LLP 2013

2006

2007

2008

2009

2010

2011

www.equiteq.com

2012

27

The Global Consulting M&A Report 2013

Management Consulting

Figure 23

Management Consulting Deals per Month

90 80

Number of deals per month

70 60 50 40 30 20

Number of Deals

10

12 Month Moving Average

Jul 12

Oct 12 Dec 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

Jan 2005

0

2005 to 2012

Figure 24

Management Consulting Revenue Multiples

1.6 1.4

1.40

Revenue Multiple

1.2 1.0

1.21

1.18

1.22

1.22

1.14

1.03

0.99

0.8 0.6 0.4 0.2 0.0 2005

2006

2007

2008

2009

2010

2011

2012

28

Covering Europe, North America and Asia Pacific

Management Consulting

Figure 25

Management Consulting EBITDA Multiples

16 15.20

EBITDA Multiple

14 12 10

11.38 10.11

9.99

8

9.65 8.87

8.93 7.79

6 4 2 0 2005

2006

2007

2008

2009

2010

2011

2012

The large deals were dominated by businesses that had developed a ‘service’ which was backed-up by strong IP or data sets, and healthcare continued to be a driving force in the sector: • Experian plc acquired Serasa S.A, a Brazilian economic and financial analysis information company for over $3bn. • Amadeus IT Holding SA acquired airconomy aviation intelligence GmbH, a strategy consultancy providing market intelligence services for the aviation networks and airline industry for, $1.5bn. • Piramal Enterprise Limited acquired Decision Resources Group, a research and advisory company, focused on healthcare insights and analysis. • At the other extreme, Chime Communications plc acquired pH associates, a small UK consulting business with data understanding for NHS drug suppliers. • Navigant Consulting Inc, picking up the pharmaceutical consultancy ‘Easton Associates LLC’ citing a particular interest in their Asian footprint.

© Copyright Equiteq LLP 2013

www.equiteq.com

29

The Global Consulting M&A Report 2013

Management Consulting

Figure 26

Proportion of Deals Related to Healthcare by Year

8%

6%

6.59%

6 34% 6.34%

2010

2011

6.97%

5.51% 4%

2%

0

2009

2012

There is an interesting development in the acquisition of consulting businesses in that a total 64% of deals were done by companies outside the sector. This is exemplified by: • MITIE Group PLC and Utilyx Limited: the facilities management business acquired Utilyx the UK energy purchasing advisory business, to enhance the service they provide to their customers. • Capita PLC and Smiths Consulting Limited: another outsourcing company, continued the growth of its consulting business with the purchase of SAP consultant Smiths. • In the US, Direct Energy Purchasing Limited was acquired by Inspired Energy plc. Whilst the traditional area of consulting across a broad-range of operational improvement activity is certainly not a ‘booming’ arena, deals continue to be completed. Elsewhere, Hitachi Ltd extended their global reach and capability through the acquisition of Celerant, and TeleTech Holding Inc, a company with customerservice focus acquired Guidon Performance Solutions from TBM Consulting. Generally we saw a move away from interests in training/leadership/change-management type businesses, although Korn/ferry the executive recruitment business, acquired Personnel Decisions, the leadership development and coaching company.

30

Covering Europe, North America and Asia Pacific

Management Consulting

Of the ‘Big-4 plus Grant Thornton’, Deloitte continues to lead the way in terms of the number of deals it completed, with PwC falling behind in the race for inorganic growth. At the end of the year Deloitte picked up the remnants of Monitor group, the strategy consultancy with illustrious roots in Harvard co-founded by the legendary Michael Porter, which was on the verge of bankruptcy. In 2013 it will be interesting to see which other mid-size consulting businesses are acquired due to their inability to maintain a global footprint at their scale. Figure 27

Big-5 Accountancy Firm Acquisitions – All Industries

18 17

16

Number of Deals

14

12 11

10

10 9

8

10

9 8

6

8 7

6

2009

5

4 2

14

14

13

13

12

2010

4

4

3

2011

2

0

2012 E&Y

© Copyright Equiteq LLP 2013

KMPG

Deloitte

PWC

Grant Thornton

www.equiteq.com

31

The Global Consulting M&A Report 2013

Media Consulting

In 2012, there were 479 deals (20% of all deals) associated with media consulting companies. We found revenue multiples fell by 25% and EBITDA multiples rose by 62%. The average deal value is $48m compared to $62m in 2011. With half of the targeted media consulting firms located in United States, we can expect activity levels to rise in Europe in 2013. Figure 28

Media Deals per Year

600 543

Number of Deals

500 400 300

410

505

479

418

406 342

304

200 100 0 2005

2006

2007

2008

2009

2010

2011

2012

32

Covering Europe, North America and Asia Pacific

Media Consulting

Figure 29

Media Deals per Month

Number of deals per month

70 60 50 40 30 20

Number of Deals

10

12 Month Moving Average

Jul 12

Oct 12 Dec 12

Apr 12

Oct 11

Jan 2012

Jul 11

Apr 11

Jan 2011

Jul 10

Oct 10

Apr 10

Oct 09

Jan 2010

Jul 09

Apr 09

Jan 2009

Jul 08

Oct 08

Apr 08

Oct 07

Jan 2008

Jul 07

Apr 07

Jan 2007

Jul 06

Oct 06

Apr 06

Jan 2006

Jul 05

Oct 05

Apr 05

Jan 2005

0

2005 to 2012

Figure 30 Media Revenue Multiples 1.6 1.4 1.39

Revenue Multiple

1.2 1.0

1.14

0.8

1.08

0.99

0.88

1.09 0.96 0.82

0.6 0.4 0.2 0 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

www.equiteq.com

2012

33

The Global Consulting M&A Report 2013

Media Consulting

Figure 31

Media EBITDA Multiples

20

EBITDA Multiple

15 14.91 13.11

12.43

11.81

10 8.52 6.95

5

7.82

7.30

0 2005

2006

2007

2008

2009

2010

2011

2012

As mentioned in the sector summary, the big buyer in the industry is WPP. They are responsible for the largest acquisition in this sector, the $540m purchase of the digital agency AKQA, Inc. WPP’s other deals included: • A 35% stake in Barrows Design and Manufacturing (PTY) Ltd, a South African retail marketing services company • A 20% increase in their stake in Chime Communications plc Aegis, another frequent buyer whose 2012 targets included; a Finnish marketing agency, a marketing effectiveness analytics consultancy, and a mobile advertising agency, now sees itself about to be acquired by Dentsu, the Japanese marketing services company (completed at the time of writing). As a good example of non-consulting services businesses moving into the sector, Menzies the UK newspaper distribution business acquired Orbital Marketing Services.

34

Covering Europe, North America and Asia Pacific

Engineering Consulting

In 2012, there were 464 deals (19% of all deals) associated with engineering consulting companies. The volume has dropped by 8% since 2011with revenue and EBITDA multiples dropping by 10% and 24% respectively. The most active buyer was Australian Cardno Limited, a professional infrastructure and environmental services company, acquiring five companies. They were followed by USA’s Bowman Consulting Group, Ltd acquiring three and Canada’s GENIVAR Inc, acquiring two. Figure 32

Engineering Deals per Year

600

Number of Deals

500

535

577

400

524

503

464

399

396 300 200

264

100 0 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

www.equiteq.com

2012

35

The Global Consulting M&A Report 2013

Engineering Consulting

Figure 33

Engineering Deals per Month

Number of deals per month

70 60 50 40 30 20

Number of Deals

10

12 Month Moving Average

Oct 12 Dec 12

Jul 12

Apr 12

Jan 2012

Jul 11

Oct 11

Apr 11

Oct 10

Jan 2011

Jul 10

Apr 10

Jan 2010

Jul 09

Oct 09

Apr 09

Oct 08

Jan 2009

Jul 08

Apr 08

Jan 2008

Jul 07

Oct 07

Apr 07

Oct 06

Jan 2007

Jul 06

Apr 06

Jan 2006

Jul 05

Oct 05

Apr 05

Jan 2005

0

2005 to 2012

Figure 34

Engineering Revenue Multiples

0.8 0.7

0.70

Revenue Multiple

0.6 0.5

0.68

0.67

0.72

0.71 0.64

0.58 0.50

0.4 0.3 0.2 0.1 0 2005

2006

2007

2008

2009

2010

2011

2012

36

Covering Europe, North America and Asia Pacific

Engineering Consulting

Figure 35

Engineering EBITDA Multiples

EBITDA Multiple

12 11.6

10 8

8.3

9.8

9.6

8.7

6

8.6 6.5

5.8

4 2 0 2005

2006

2007

2008

2009

2010

2011

2012

Whilst volumes and price softened, there was very little change in the mix of the type of businesses acquired in this very traditional sector. The focus on acquiring companies with an environment capability continued to be a big theme, with interest in energy capability companies having a small fall-off.

Figure 36

Proportion of Deals Related to Environment and Energy by Year

Index of Deal Frequency

130 120 110 100 90 80

Environment

70 60 2009

© Copyright Equiteq LLP 2013

Energy 2010

2011

2012

www.equiteq.com

37

The Global Consulting M&A Report 2013

Human Resource Consulting

In 2012, there were 304 deals (12% of all deals) associated with HR consulting companies. Although this is the smallest sub-sector overall, it has had a 2% increase on 2011, continuing its steady growth path since 2009. EBITDA multiples remained at similar levels to 2011 with an insignificant decline, whereas revenue multiples dropped by 35%. Management teams across the board have recognised their people as a critical asset and the resulting investment and M&A in this area has ensured this sub-sectors steady growth.

Figure 37

HR Consulting Deals per Year

450 400

424

Number of Deals

350

359 326

300

298

304

250 200

248

234 197

150 100 50 0 2005

2006

2007

2008

2009

2010

2011

2012

© Copyright Equiteq LLP 2013

2005 to 2012

www.equiteq.com

Oct 12 Dec 12

Jul 12

Apr 12

Jan 2012

Oct 11

Jul 11

Apr 11

Jan 2011

Oct 10

Jul 10

Apr 10

Jan 2010

Oct 09

Jul 09

Apr 09

Jan 2009

Oct 08

Jul 08

Apr 08

Jan 2008

Oct 07

Jul 07

Apr 07

Jan 2007

Oct 06

Jul 06

Apr 06

Jan 2006

Figure 38

Oct 05

Jul 05

Apr 05

Jan 2005

Number of deals per month Covering Europe, North America and Asia Pacific

38

Human Resource Consulting

HR Consulting Deals per Month

100

90

80

70

60

50

40

30

20

10 Number of Deals

0 12 Month Moving Average

39

The Global Consulting M&A Report 2013

Human Resource Consulting

Figure 39

HR Consulting Revenue Multiples

0.8 0.76

0.7

0.70

Revenue Multiple

0.6

0.76 0.71

0.67 0.60

0.5

0.51

0.49

0.4 0.3 0.2 0.1 0 2005

Figure 40

2006

2007

2008

2009

2010

2011

2012

8.0

7.8

2011

2012

HR Consulting EBITDA Multiples

EBITDA Multiple

20.0

15.0

15.9 13.9 12.0

10.0

10.9 9.0

5.0

5.9

0 2005

2006

2007

2008

2009

2010

40

Covering Europe, North America and Asia Pacific

North America

North America Overview

North American M&A activities have been slowing down with growing concerns about the United States fiscal cliff negotiations, Dodd-Frank regulatory changes, unpredictable markets and the continued pressures of risks in the Eurozone. However, the North American deal volume recovered strongly after the first quarter, with an overall 1.4% increase. This is due in part to the US end-of-the-year deals being done in preparation for the 2013 tax hikes, which caused a significant amount of economic activity moving from 2013 into 2012. Revenue multiples stayed constant in the region while EBITDA multiples dropped by 11%. Figure 41

Deals in North America by Year

1,200

Number of Deals

1,000

1,011

800 600

888

837

777

978

990

1,004

2010

2011

2012

731

400 200 0 2005

Figure 42

2006

2007

2008

2009

Revenue Multiples in North America

1.4 1.26

1.2

Revenue Multiple

1.0

1.12 0.99

1.04

2006

2007

0.92

0.8

1.06

1.05

2011

2012

0.92

0.6 0.4 0.2 0 2005

© Copyright Equiteq LLP 2013

2008

2009

2010

www.equiteq.com

41 North America

The Global Consulting M&A Report 2013

North America Overview

Figure 43

Deals in North America per Month

Number of deals per month

140 120 100 80 60 40

Number of Deals

20

12 Month Moving Average

Oct 12 Dec 12

Jul 12

Apr 12

Jan 2012

Jul 11

Oct 11

Apr 11

Oct 10

Jan 2011

Jul 10

Apr 10

Jan 2010

Jul 09

Oct 09

Apr 09

Oct 08

Jan 2009

Jul 08

Apr 08

Jan 2008

Jul 07

Oct 07

Apr 07

Oct 06

Jan 2007

Jul 06

Apr 06

Jan 2006

Jul 05

Oct 05

Apr 05

Jan 2005

0

2005 to 2012

Figure 44

EBITDA Multiples in North America

16

EBITDA Multiple

14

14.54

12

12.80

13.47

12.99 11.20

10

9.95

8

8.74 6.95

6 4 2 0 2005

2006

2007

2008

2009

2010

2011

2012

42

Covering Europe, North America and Asia Pacific

Europe

Europe Overview

2012 was an uncertain and volatile year due to the threats of Greece leaving the Eurozone, overall economic instability and the questionable future of the single currency. The vague situation was reflected in the number of deals, which dropped to its lowest level since 2009 (a 15% drop compared to 2011). On the other hand, revenue and EBITDA multiples significantly increased for the region. Revenue multiples reached an 8 year high with a 33% increase on 2011, while EBITDA multiples jumped by 39%. Good companies still sell and can realize competitive prices even if the underlying economy is shaky. Buyers still need to grow and have money to spend to fund acquisitions. The problem in recent years in Europe has been the availability of robust growing targets to acquire. The volumes may be down but for the right target firm good prices can still be achieved. Figure 45

Deals in Europe by Year

1600

Number of Deals

1400

1,467 1,318

1200 1,152

1000

1,080 890

800 600

982

916

717

400 200 0 2005

© Copyright Equiteq LLP 2013

2006

2007

2008

2009

2010

2011

www.equiteq.com

2012

43 Europe

The Global Consulting M&A Report 2013

Europe Overview

Figure 46

Deals in Europe per Month

Number of deals per month

200

150

100

50

Number of Deals 12 Month Moving Average

Jul 12

2005 to 2012

Figure 47

Revenue Multiples in Europe

1.2

Revenue Multiple

1.0

0.6

1.01

0.96

0.8

0.86

0.77

0.80 0.69

0.76

0.76

2010

2011

0.4 0.2 0 2005

2006

2007

2008

2009

2012

Oct 12 Dec 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

Jan 2005

0

44

Covering Europe, North America and Asia Pacific

Europe

Europe Overview

Figure 48

EBITDA Multiples in Europe

16

EBITDA Multiple

14 12 10

12.53

12.40 10.99

10.75

8

8.33 7.40

6

7.56

7.93

2010

2011

4 2 0 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

www.equiteq.com

2012

The Global Consulting M&A Report 2013

Asia Pacific Overview

The turbulent global economic environment continues to have the biggest impact on M&A activity, but in the Asia-Pacific region it is concerns about unrealistic price expectations, protectionism and/or regulatory issues that are suppressing M&A activity. With the number of deals dropping sharply in the second half of 2012, we saw 28% of the deals in this region associated with IT consultancies, reflecting the dominance of that sub-sector. The number of deals in Australia decreased by 18% compared to 2011. This significant slowdown in Australian M&A activity was caused by the strengthened Australian dollar (which has increased cost of resources production). In the region, 23% of all deals were made in Japan, followed by Australia (18%) and China (13%).

Figure 49

Deals in Asia Pacific by Year

500 450

459

400

388

376

356 329

300 250

442

416

350 Number of Deals

Asia Pacific

45

269

200 150 100 50 0 2005

2006

2007

2008

2009

2010

2011

2012

46

Covering Europe, North America and Asia Pacific

Asia Pacific

Asia Pacific Overview

Figure 50

Deals in Asia Pacific per Month

Number of deals per month

60 50 40 30 20 Number of Deals

10

12 Month Moving Average

Jul 12

Oct 12 Dec 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

Oct 06

Jan 2007

Jul 06

Apr 06

Jan 2006

Jul 05

Figure 51

Oct 05

Apr 05

Jan 2005

0

Revenue Multiples in Asia Pacific

Revenue Multiple

1.0 0.8 0.6

0.84 0.64

0.63

2005

2006

0.69

0.72

0.68 0.57

0.54

0.4 0.2 0

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

2012

www.equiteq.com

47 Asia Pacific

The Global Consulting M&A Report 2013

Asia Pacific Overview

Figure 52

EBITDA Multiples in Asia Pacific

16

EBITDA Multiple

14 12 10

11.43 9.84

8

8.52

9.49

9.00 7.87

6

8.21 6.32

4 2 0 2005

2006

2007

2008

2009

2010

2011

The lower deal volumes in Asia-Pacific caused deal prices to reduce in recent years. Economic uncertainty in traditional buyer geographies like the USA and Europe has driven those buyers to look closer to home for acquisition targets. Both Revenue and EBITDA multiples have been in steady decline since 2010 and current valuations represent good value compared to other regions in this report.

2012

48

Covering Europe, North America and Asia Pacific

South America

South America Overview

The South American region had its highest number of deals over the last 8 years, albeit from a very small base, and this is despite the slowed down activity in Brazil. A slugish economy, concerns about protectionism and increasing government intervention, and recently introduced anti-trust laws, were the main factors causing stagnant M&A activity in Brazil. Outside Brazil, transaction activity was increasing, reflecting political stability and healthy economic performance indicators (in terms of inflation, domestic demand and consumption, and public debt), with many areas opened to foreign investors. Investing in Latin America requires additional planning compared with deals in other regions, as a result of the unique risks associated with this growth market. To reduce political risk, investors may wish to invest along with local governments or look for the best possible Bilateral Investment Treaties. Some of the risk factors are the poor availability of financing, the inflexible exit opportunities and tax planning. However for those investors looking for high growth relative to more mature markets and willing to manage potential risks, prices of firms are very attractive. Figure 53

Deals in South America by Year

70

Number of Deals

60 50 48

40

52 45 37

30 20

65

61

23

25

10 0 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

2012

www.equiteq.com

49 South America

The Global Consulting M&A Report 2013

South America Overview

Figure 54

Revenue Multiples in South America

1.4

Revenue Multiple

1.2 1.11

1.0

1.03

0.8 0.6

0.61

0.4

0.62

0.56

0.70 0.59

0.56

2011

2012

0.2 0.0 2005

Figure 55

2006

2007

2008

2009

2010

EBITDA Multiples in South America

16

EBITDA Multiple

14

14.71

12 10 8 6.87

6

6.62 5.34

4 2

3.26

0 2005

3.14 NO DATA AVAILABLE

2006

NO DATA AVAILABLE

2007

2008

2009

2010

2011

2012

50

Covering Europe, North America and Asia Pacific

Africa

Africa Overview

This is the first time we have commented on consulting deals in Africa. Deal volumes have followed the trend in other more mature M&A markets and have been growing, albeit from a small base, over the past four years. We don’t have sufficient data to comment on profit multiples in the region but revenue multiples today appear in line with other more mature markets. This could reflect the large growth opportunity that exists in this region compared to others. Figure 56

Deals in Africa by Year

100 90

91

80

82 76

Number of Deals

70

65

60 54

50 45

40

48

39 30 20 10 0 2005

2006

© Copyright Equiteq LLP 2013

2007

2008

2009

2010

2011

www.equiteq.com

2012

51 Africa

The Global Consulting M&A Report 2013

Africa Overview

Figure 57

Revenue Multiples in Africa

1.4

Revenue Multiple

1.2 1.0 0.8 0.6

0.69

0.64

0.77

0.48

0.49

0.4 0.2

0.94

0.88

0.31

0.0 2005

2006

2007

2008

2009

2010

2011

2012

52

Covering Europe, North America and Asia Pacific

Stock Market Review

Some comparisons between stock values and M&A deals can be made, though sellers of businesses need to be aware that values of freely traded shares are normally significantly higher than privately-held companies. However, that said, the Revenue and EBITDA valuation multiples do provide some useful comparisons with deals. We see the Engineering businesses at much lower revenue multiples than other businesses, generally due to their lower EBIT performance. Within the IT space, we see a significant range of values which reflects the varied nature of IT consulting firms, some of whom have product revenues and others that have long-term annuity managed service contracts as well as traditional consulting fees. Figure 58

Share Price Revenue Multiples by Sector

1.2

Revenue Multiple

1.0

1.13

1.09 0.87

0.8 0.6

0.60

0.4

0.48 0.48

0.43

0.82

0.65

0.50

0.2

2011

0

2012 Management Consulting

Engineering

© Copyright Equiteq LLP 2013

HR

IT Services

Media

www.equiteq.com

53

The Global Consulting M&A Report 2013

Stock Market Review

Figure 59

Share Price EBITDA Multiples by Sector

Revenue Multiple

10

8.89

8

8.06 6.81 7.08

6

6.43

6.82

6.80 6.69 5.55

4

5.12

2

2011

0

2012 Management Consulting

Engineering

HR

IT Services

Media

In order to track M&A valuations against the stock market we have created a number of indices from businesses in the USA and Europe. Figure 60

Share-Price Index, 4-year Trend

250 200 150

Management Consulting

100

Engineering HR

50

IT 0

2008 to 2012

12 / 2012

9 / 2012

6 / 2012

3 / 2012

12 / 2011

9 / 2011

6 / 2011

3 / 2011

12 / 2010

9 / 2010

6 / 2010

3 / 2010

12 / 2009

9 / 2009

6 / 2009

Media

3 / 2009

12 / 2008

Share Price Index, Dec 2008 = 100

300

54

Covering Europe, North America and Asia Pacific

Further Resources

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

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

operating metrics. Download the briefing pack at www.equiteq.com/EGA

Valuation and Market Risk Assessment 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

How to Grow and Sell a Consulting Firm This quick guide aimed at SME consulting firm owners who want to create a growth business with high equity value, making it attractive to buyers so that they can sell it in the future Download for free at www.equiteq.com/GrowSellGuide

© Copyright Equiteq LLP 2013

www.equiteq.com

55

The Global Consulting M&A Report 2013

About Equiteq

Equiteq is a strategic advisory and M&A transaction firm wholly focused on the Consulting Sector. We help firms grow rapid equity value and ultimately realise that value through a sale to a third party. On the acquisition side we provide sophisticated tools and expertise to fast find a wide pool of target firms that meet the ideal profile of the buyer. All the client-facing staff at Equiteq have been involved in the growth and sale of their own consulting firms. Our advice is down-to-earth and based on what we know works in practice – no textbook theories! Our clients currently span 27 countries and 6 continents, transcending all the professional services sectors. They range from SME firms who want to grow faster, to those that are ready to find a buyer, up to strategic buyers or financial investors that wish to invest in acquisitions. For those with serious growth and sale aspirations we engage with our Equity Growth Accelerator service www.equiteq.com/EGA. We will work with you to determine the current value of the business and agree what valuation target is achievable. Our Valuation Model produces the most accurate prediction of value you will find for your firm in today’s market.

Figure 61 Equiteq Valuation Model

Price =

1

Discounted EBIT Multiplier

X

2

equiteq Risk Factor eRF

X

3

Market Premium

X

4

Synergy Premium

We then benchmark your current equity growth performance against the 80 key performance indicators in our Equity Growth Wheel. By understanding the gaps and those things that are dragging value down, we can then prioritize the actions that will maximise growth, create a plan to get there and help you make it happen.

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Covering Europe, North America and Asia Pacific

When the time is right we help sellers to prepare for sale and then manage the marketing of your firm. We are experts at finding a strong pool of relevant buyers, nurturing their interest, helping them to understand the true value of your business to them and closing a deal that maximizes your value. For buyers, our understanding of the consulting sector is unparalleled. We are often asked to put that capability to work supporting the acquisition needs of growing firms globally who wish to find the perfect consulting firm to acquire. We have sophisticated tools and capability to search for the right firm with

Figure 62 Equiteq Growth Wheel

the perfect combination of size, financials, skills and market reach. Our consulting firm and deals database gives us instant access to 250,000 consulting firms, over 2,000 active buyers and the details of over 5,000 past deals. For more information on all of our services, visit www.equiteq.com

Figure 63 Synergy Cube

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The Global Consulting M&A Report 2013

Disclaimer

Equiteq LLP is an advisory firm that exists to provide you, the owners of consulting firms, with the best possible information, advice and experience to help you make decisions about the growth and potential sale of your firm. What follows is a legal disclaimer to ensure that you are aware that if you act on this advice, Equiteq cannot be held liable for the results of your decisions. We have obtained the information provided in this report from sources which we believe to be reliable, and we make reasonable efforts to ensure that it is accurate. However, the information is not intended to provide tax, legal or investment advice. We make no representations or warranties in regard to the contents of and materials provided in this report and exclude all representations, conditions and warranties, express or implied arising by operation of law or otherwise, to the extent that these may not be excluded by law. We shall not be liable in contract, tort (including negligence) or otherwise for indirect, special, incidental, punitive or consequential losses or damages, or loss of profits, revenue, goodwill or anticipated savings or for any financial loss whatsoever, regardless of whether any such loss or damage would arise in the ordinary course of events or otherwise, or is reasonably foreseeable or is otherwise in the contemplation of the parties in connection with this report. No liability is excluded to the extent such liability may not be excluded or limited by law. Nothing in this statement shall limit or exclude our liability for death or personal injury caused by our negligence. We hope that’s very clear! .

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April 2013

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