Next year is shaping up to be a very strong year for M&A activity in the Knowledge Economy. In order to assist your preparation for 2021, take a look at our M&A Preview, in which we discuss the following eight key trends:
- The adoption of digital is accelerating
- Emerging technologies are being commercialised rapidly
- There is a convergence across the sector and delivery models are blending
- Private equity participation in the knowledge economy is increasing
- Next-generation technology platforms are emerging
- Vertical software solutions are playing an increasing role
- Buyers are returning to nearshore locations for access to new skills
- Shareholders are aligning expectations and addressing structural risks
November 2015
Buyers of consulting firms are more than doubling their acquisition expectations according to new research from consulting firm M&A specialist, Equiteq. As the market becomes more competitive, buyers are also targeting larger consulting firms and prefer businesses with strong Intellectual Property and a quality client base.
Independent research from over 100 buyers of consulting firms showed that buyers are anticipating acquisition growth to increase from an average of 6% to 15% over the next two to three years. Of the buyers surveyed, there is over $7.7bn of funds available for acquisition of more than 400 consulting firms in the next two to three years.
Shant Yeremian, Buyer Relationship Director at Equiteq said:
“There is clear evidence that transactions in the consulting sector have been on the rise, and we continue to see positive forward looking signals for owners thinking about selling their firm over the next few years. Our research saw an 11% increase over last years average consulting firm buyers deal budget so for sellers of consulting firms, the significant increase in buyer appetite and budget for near term deals is good news.”
In addition, buyers on average are looking to acquire larger firms compared to last year with the target acquisition size for consulting firms ranging between $18m and $45m in revenues, with an optimum size of $31m. This reflects a significant increase in size preference.
Paul Collins, CEO at Equiteq added:
“Although many buyers would prefer to acquire larger consulting firms, we are experiencing a market where in practice a large number of buyers are acquiring smaller firms, so knowing the right buyers to approach can make the difference between success and failure when selling your firm.”
Intellectual Property (IP) continues to be a key consideration for buyers. 68% of all buyers found IP extremely or very important as a factor when assessing potential acquisition opportunities. It was also important to buyers that IP provides complementary revenue streams to consulting services, such as software or subscriptions, and that when IP is acquired, buyers are effectively able to leverage it within their own firms.
Following an acquisition, buyers of consulting firms focus on the integration of people above all else in the first 90 days after an acquisition. Clients are the next highly prioritized area and the integration of technology and systems follows on from these. On average, sellers of consulting firms can expect to be involved in an integration period for just under 2 years following an acquisition.
Equiteq’s consulting buyers research included 107 structured quantitative interviews carried out by Illuma Research with senior decision-makers in Europe and North America during September 2015. The full Buyers Research Report 2015/16 can be downloaded at www.equiteq.com
©Equiteq 2015