Mergers and acquisitions in consulting sector riding high
More good news for the global economy
At the end of last year, we reviewed the findings of the Australasia Capital Confidence Barometer which demonstrated a significant up-shift in the number of companies actively seeking acquisitions – in fact, double the number it had been six months previously. Half a year on and a report just out by consulting experts Equitec suggests it’s a trend that’s continuing into 2015, with mergers and acquisitions (M&A) on the rise in the global consulting sector, too.
Rising deal values
Deal volumes for 2014 were only 7% below their pre-crash market peak in 2007 and are more than 30% higher than the 2009 low. Admittedly, the USA is still dominating global deal volumes, at around half of all consulting M&A deals – against a backdrop of steady economic progress – with Europe bagging a third of the action and Asia Pacific still slightly squeezed at 13%, as China’s sluggish recovery impacts the broader region. Nevertheless, it’s good news for businesses everywhere looking to make a strategic acquisition – or angling to be acquired.
Lots of transactions across the consultancy market
There are some interesting take-aways from the report. The consulting sector is fairly atypical of the M&A market as a whole, as it attracts many more small-value deals than in other markets. In 2014, more than a third of acquisition values were under $5m, with a whopping 70% under $40m. This makes acquisition a viable prospect for small businesses looking to sell up or to become part of a much larger organisation.
Companies that have been on the acquisition trail in the last year were looking for a variety of outcomes including ‘synergistic benefits’. Some have needed specific skills that are easier to acquire than build – this is especially true in the IT sector, where the threat of increasingly sophisticated cyber-attacks has left some companies exposed. Media buyers have been looking to establish strong digital capabilities to help keep up with technical advancements: again something that’s quicker and easier to acquire than develop from scratch.
The industry sectors that are showing the greatest promise for 2015 are social/mobile/digital media consultancies, staffing and recruitment consultancies and those involved in regulations and compliance. IT will continue to dominate the market, especially if acquisition targets can demonstrate strengths in business intelligence, data analysis, cyber security and smart mobile technologies.
Make hay while the sun shines
If you’re a consulting business looking at M&A, you’ll need to take an orderly approach to get the best deal. The first step is to make sure your financial statements and management accounts are pristine. All legal documentation should be in place with contracts up to date so you’re in a position to move without delay.
It’s a seller’s market at the moment and a good time to consider offers – especially with the level of uncertainty around the date of an end to quantitative easing in the US which could cool demand by the end of the year. Take the time to prepare your business for sale and you’ll be in pole position to take advantage of the opportunities that arise in the coming months.
To find out more about maximising the value of your business, call Succession Plus to arrange a confidential discussion.