December 2016: Knowledge-Intensive Services Market Update

Knowledge-Intensive Services M&A Activity and Equiteq Consulting Share Price Index Performance

By Ramone Param, Market Insights & Buyer Coverage Associate, Equiteq.

2016 ended with a number of high-profile deals being signed across all five of our knowledge-intensive services segments. The share prices of many listed consultants that form part of our Equiteq Consulting Share Price Index also reached record highs. This continued strong investor confidence in the sector is also observed across other industries as reflected by the strong gains of the S&P 500 and Dow Jones, as well as the FTSE 100 which reached an all-time high by year end.

The largest deal to be announced in December was KKR & Co.’s acquisition of cyber-security specialist, Optiv Security, from The Blackstone Group. The deal followed Blackstone’s filing for an initial public offering of Optiv last month. The sale of the business follows a number of recent high-profile and lucrative private equity exits of portfolio companies operating in the consulting sector, including the sale of Pactera by Blackstone and the sale of AlixPartners by CVC Capital Partners. We expect that these successful landmark sales will support strong appetite from financial buyers investing in the sector in the New Year.

In the management consulting and IT services segments, there were also a number of smaller but notable transactions, including:

• The sale of our client, P2 Consulting, a leading project and programme management company, to Lonsdale Capital Partners, a UK-based private equity firm. With Lonsdale’s investment and wider support, P2 intends to accelerate its growth and capitalise on attractive acquisition opportunities in a fragmented space that is experiencing increasing demand driven by governmental, regulatory, market and business change, as well as the UK’s vote to Brexit.
• Alsbridge’s announced merger with Information Services Group (ISG) – considered to be one of the most significant deals in the outsourcing advisory market since KPMG’s acquisition of EquaTerra in 2011. ISG paid a total of $74m for Alsbridge, comprising of $56m of cash, $11m of ISG stock and a $7m seller’s note. Alsbridge management will receive a material portion of their consideration in ISG stock. ISG is forecasting substantial synergies from the deal through cost-reduction and new revenue opportunities. The combined business is expected to grow to over 1,300 consultants, which will place pressure on the outsourcing advisory businesses of the Big Four and smaller boutique competitors such as Avasant and Everest.
• Deloitte UK’s acquisition of Regester Larkin, a global consulting business specialising in crisis and reputation management that is expected to double Deloitte’s existing crisis and strategic risk business. The acquisition is another move by a regular consulting buyer to acquire into the public relations space in the UK following Accenture’s recent acquisition of Karmarama.
• Cognizant’s acquisition of Adaptra, an Australian technology implementer and consultancy focused on serving clients in the insurance sector. The deal follows pressure on Cognizant to use its cash to strengthen its digital capabilities after activist investor, Elliot Management, expressed concerns about Cognizant’s level of acquisitions in the space in comparison to its highly acquisitive competitor, Accenture.
• 4C Consulting, a Belgian-based Salesforce Platinum Partner, acquisition of CloudSocius, one of the biggest Salesforce Gold Partners operating in the UK and UAE. The acquisition will make 4C one of the largest independent European Salesforce Partners with over 180 consultants operating across EMEA.

There was also notable deal activity in the Engineering services and Human Resources segments. Global Human Resources consultancy, Mercer, acquired Sirota Consulting LLC, a US-based global provider of employee engagement solutions. Adas, the UK’s biggest independent farm consulting company, was bought by environmental consulting and engineering services business, RSK.

Selected Knowledge-Intensive Services M&A Deals Announced in December:

Important Notice: This article has been compiled using our daily activities in the industry that provide us with unique market intelligence, along with various third party information sources. Valuation metrics in italics are rumoured and have not been confirmed with company press releases.

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