M&A activity in UK cloud consulting market booming

16 March 2015 Consultancy.uk

Cloud-based consulting M&A deals in the UK have more than doubled since 2012 on the back of strong demand for skills and the widening of specialised offerings like cloud, data analytics and cyber security. With the industry still in its infancy, deal volume is expected to further increase in the coming years as cloud-based consulting becomes mainstream.

Cloud computing has taken off in the last decade, revolutionising the IT-industry and showing itself to be one of the world’s leading transformational technologies for businesses across all sectors. Through its shared and external nature it has helped businesses reduce the cost of infrastructure ownership, allowed for ease of scalability and boosted profitability – among other benefits. According to data from Gartner, the global cloud services market* is worth more than $150 billion, up 19% from the previous year, and is forecasted to continue its double-digit growth trajectory in the coming years, bringing the market to a size of $210 billion by 2016.

Global Cloud Services Market

With cloud adoption booming, so too is the demand for consultants in the field. To capitalise on the potential, consulting firms have in recent years massively been boosting their cloud and related-service offerings, both organically as well as through mergers and acquisitions. An analysis on deal activity in the UK consultancy landscape, based on data from M&A advisor Equiteq, reveals that since 2012 the deal volume in cloud consulting has taken off. In 2012 thirteen deals were registered, last year the number had risen by 123% to 29 transactions. Recent well known examples of M&A include KPMG’s £20 million acquisition of Crimsonwing (includes teams in the Netherlands and Malta) and Aon’s purchase of Workday consultancy Kloud. 

On top of achieving more depth in service offerings and scale, other key M&A drivers for consulting firms include the ability to effectively keep abreast with changes in the industry, gaining access to intellectual property developed or held by cloud-based consulting firms and the possibility to add a client base with significant cross-selling opportunities across the firm’s service portfolio.

Cloud-based Consulting M&A Activity

Looking ahead, deal activity is forecasted to continue to rise, says Equiteq, stating: “We expect to see many more consulting deals involving cloud technologies, as this area continues to become a mainstream part of the IT industry.” Most in demand targets are consultancies offering cloud-based software, cyber security, data analytics and cloud infrastructure solutions, while also SaaS, PaaS and IaaS will continue to generate a lot of market interest.

* The market definition includes six segments: PaaS, IsaaS, SaaS, BPaaS, Cloud Management and Security and Cloud Advertising.