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
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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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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
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2006
2007
2008
2009
2010
2011
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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
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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
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2009
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2011
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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
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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
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2009
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2011
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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
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2009
2010
2011
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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
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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
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2009
2010
2011
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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
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2009
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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
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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
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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
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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
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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
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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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