Deal volumes in the consulting sector reach near-peak conditions

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2015 was a fantastic year for Consulting sector M&A deals! According to Equiteq’s Global Consulting Mergers & Acquisitions Report 2016, deal activity in the sector grew by 9.4%, continuing an upward trend in deal activity and multiples.

Paul Collins, Equiteq CEO

The key message for consulting firm sellers in 2016 is that now is the time to prepare your business for sale

Despite the current negative sentiment towards overall M&A activity in 2016, first quarter 2016 results show no slowdown in this growth trend in the Consulting sector.

This is a steady deal market, with an overall balance of consolidation and fragmentation occurring in different sub-segments. The consulting sector is also incredibly resilient to economic and market cycles, with a long term average of 150-200 deals per month and deal activity remaining above 100 deals per month during the last financial crisis.

In 2015, there were 2418 acquisitions in the global consulting sector, including management consulting, IT consulting and services, Media agencies, Engineering consulting and HR advisory firms. This growth follows a trend of steadily increasing deal activity in this sector since the financial crisis.

While global deal volumes in the sector returned to near-peak levels, deal value trends also hit a post-crisis peak in 2015, with global consulting transaction revenue multiples at the highest level since 2007! This highlights the very healthy transaction conditions currently in this sector, where buyer demand continues to outstrip supply, ultimately driving deal values higher.

Looking at international trends, 20% of total global consulting M&A were cross-border deals, with 84% of this international deal activity within developed western markets. North America accounts for approximately half of total global M&A activity, with one third in Europe (mainly UK) and Asia-Pacific at 13%, largely driven by Australian deals. 75% of deals done worldwide were completed by only 5 countries: US, UK, Australia, France and Canada. The key factors that continues to drive foreign acquisitions are buyers’ proximity to the culture, economics and politics of the target’s country.

In the consulting sector, we continue to see a large number of small value deals. In 2015, 83% of deal volume was below $100m with 70% under $40m, although deal values range from under $5m to over $500m. On average, these consulting sector transactions involved deal structures with 60% paid upfront and 40% as an earn-out over two to three years.

“The key message for consulting firm sellers in 2016 is that now is the time to prepare your business for sale” said Paul Collins, Equiteq’s Founder and CEO. “Although market conditions are different now than the last peak in 2007 and there remains some cautious optimism among buyers about near term activity, these positive conditions are unlikely to continue for long at current near-peak levels. Sellers should take advantage of the demand in the market while it lasts.”

Equiteq’s Global Mergers and Acquisitions Report 2015 is available to download for free here: http://www.equiteq.com/equiteq-edge/m-a-intelligence/2016-ma-report-1/ .

About Equiteq

Equiteq is the global leader in providing strategic advisory and Mergers &
Acquisition services to consulting and IT services firms. We focus 100% on helping owners fulfil their exit goals. We do this by achieving successful sales that deliver maximum value for firm owners and by providing strategic advice on what will best yield value growth and shareholder returns against their objectives. We have offices in New York, London, Singapore and Sydney.

About Equiteq’s Global Consulting M&A Report 2016

The Global Consulting M&A Report 2016 is the only publicly available information on the Global M&A market. It covers professional services companies across all major industry segments including: management consulting, engineering, HR services, IT services and media consultants. The full report can be downloaded free from http://www.equiteq.com/equiteq-edge/m-a-intelligence/2016-ma-report-1/

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Paula Allerton
Equiteq LLP
+44 2036510614
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Sophie Lewis
Equiteq
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