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Knowledge economy M&A deal flow remains robust, with digital disruption driving demand and premium valuations for firms in hot spaces.

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The Knowledge Economy Global M&A Report 2018
April 2018


  • M&A volume dropped 5% in 2017 compared to 2016, but deal structures and values were more attractive, and total deal value increased, with an average deal size of $69.4m
  • Digital disruption across all segments of the knowledge economy is driving M&A activity and premium valuations
  • M&A transaction volumes are highest in North America, with 48% of deals, and Europe, with 37% of deals, but cross-border M&A remains structurally higher in APAC
  • Management consulting was the strongest performing segment, with M&A across adjacent industries again being a key theme

Despite a 5% drop in deal volumes, deal flow was robust in 2017, underpinned by a strong global economic outlook, as well as continuing demand for growth and substantial capital available for deals by strategic buyers and private equity investors. As in-demand segments continue to experience shortages of people with requisite skills, demand for acquisitions of niche capabilities at premium prices is rising.


Major upheaval of the consulting industry
Digital disruption is challenging the traditional definition of a consulting firm. Client demand for smarter solutions is forcing consulting firms to rethink their business models and develop service-enhancing tools and complementary managed services capabilities, as well as broaden their digital transformation advisory capabilities. This is resulting in M&A deals that are redefining the sector, such as Gartner’s acquisition of CEB, BCG’s acquisition of MAYA and Office Depot’s purchase of CompuCom.


APAC continues to be a focus for cross-border M&A
Global cross-border deal flow accounted for 22% of all deals (down from 28% in 2016); despite the global contraction, APAC remained high at 29%. Globalization, economic development and rising adoption of new technologies are driving international demand for specialist businesses in the region, particularly within IT services and media agencies. Cash-rich buyers, notably from Japan, Australia, China and India, are using M&A to expand internationally, reducing their dependence on local markets.


The foremost space for deal activity was the rapidly evolving management consulting segment, followed closely by media agencies
M&A activity in the management consulting sector rose 5% in 2017, with the industry continuing to converge with adjacent knowledge-intensive services, as well as the software sector. Strong pricing and competition for assets is being exacerbated by rising valuations of listed management consulting firms, with market capital fuelling their search for new avenues of growth.


2018 outlook is strong
Many cash-rich buyers of consulting firms across management consulting, media agencies, human resources, engineering consulting and IT services are preparing strategic plans to penetrate new markets via acquisition in 2018. The fast pace of development of new digital technologies in spaces, like data analytics, automation, blockchain and augmented reality will continue to impact on business models across sectors, and will dictate where we see the most M&A activity over the next few years.


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