M&A activity in Consulting reaches an all-time High

Date: 23-05-2007
Source: consultant-news.com

Deal activity in the consulting sector has been accelerating and the most likely acquirer of a consulting firm is an investment house. These are just some of the key findings to emerge from a new report published by consulting M&A specialists Equiteq.

Tracking M&A activity within the consulting market, the report shows that there were 602 sales of consulting firms in Europe during the period 2002 - 2006. In the comparable period the US market produced 598 deals, albeit bigger deals than their European counterparts. Within Europe the average deal size is running at £20m – and most noteworthy of all, the rate of dealflow has been accelerating. As have the P/E and sales ratios being used to value firms.

Taken in combination, these trends suggest now is a timely point in the economic cycle to be selling a consulting business. But who would be a potential buyer?

The most high-profile acquisitions of late have been those involving the acquisition of one consulting firm by another. Examples include Detica’s acquisition of m.a.partners and the recent announcement that Hitachi Consulting is acquiring Impact Plus. However the Equiteq research shows that the most prevalent buyers in the last year were actually investment houses, with consultancies and business services firms following up as the second and third most likely acquirers of a consulting business.

But there is clearly also an appetite amongst outsourcers and software firms to extend their capabilities into the consulting sector, reflecting the trend for large consulting firms to increasingly offer outsourcing services and vice-versa.

In all likelihood it is the continued buoyant state of the economy, combined with the range of organisations interested in acquiring such firms, that is driving activity levels within the consulting M&A space. But how long can this last? Equiteq Director Paul Collins comments “The consulting M&A market has reached its highest peak since the dot-com boom of the late 1990s. If you are the owner of a consulting firm who has been considering selling your business and reaping the benefits of your hard work – there has never been a been a better time to sell than now.”