Management consulting M&A leads the way as cross sector demand stabilises

30 January 2018 6 min. read

The number of deals in the consulting industry remained stable in final quarter of the year, according to data released by Equiteq. This was bolstered by a 58% rise in deal activity in the management consulting segment, compared to the same period in 2016.

Mergers and acquisitions in the consulting space calmed after a strong start to 2017. Management and technological consulting were the largest targets of the industry, with the two sectors being the only two to have seen positive growth in the first half of the year – but the most recent data available shows that while these maintained interest as key targets, media and IT consulting also saw stable levels of demand before the year’s end.

According to researchers from Equiteq, there were 604 deals involving consulting firms during Q4 2017, roughly equal to the amount in the previous quarter and down 4% on the volume in the same quarter the year previous. To compile the data, Equiteq, which is an M&A advisor to the consulting industry, looked at all notable deals in five key segments of the consultancy landscape: management consulting, human resources, media consultancies, engineering consulting firms, and technology consultancies.

Analysis of the data shows that there were large variations in deal activity by segment. Over 220 deals were closed in management consulting, with the most notable being the acquisition of Duff & Phelps by Permira in a transaction valued at $1.75 billion. Duff & Phelps is a leading provider of valuation and corporate finance advisory services, including disputes and investigations, compliance and regulatory matters, with the from UK-based expected to help Duff & Phelps expand its range of services and geographical footprint, particularly in Europe and Asia.

Other high-profile management consulting deals included Navigant’s purchase of US firm Quorum Consulting. The organisation integrated into Navigant’s life sciences practice, situated in its healthcare business.

Adding to a frenzy of activity involving management consultancies, SiaPartners purchased ShiftINPartners – a firm which had already gained a strong position in the Middle East – while the growth in demand within management consulting was so strong that even the two-year absence of PA Consulting in M&A action came to an end. The consultancy confirmed a deal for Nyras, an aviation sector specialist, in PA’s first reported acquisition since the $1 billion buyout of The Carlyle Group in 2015.

M&A in the consulting industry

TSA Management, an Australian management consulting firm, meanwhile received a key investment from Livingbridge, a UK based private equity firm. The deal between the investors and the programme and project management specialists was closed by Equiteq.

The number of deals in both media consultancy space and technology services reached heights of around 150 in the fourth quarter. Major IT deals in the period included DXC Technology's purchase of Logicalis SMC and Office Depot's transformational acquisition of CompuCom. PwC also completed the purchase of cDecisions, a UK-based Salesforce consulting player, which will further strengthening PwC UK’s arm in the Salesforce market.

Across the Channel, France saw major activity from Orange Business Services, with the acquisition of Business & Decision. The data and digital services specialist Business & Decision is a Euronext Paris-listed leading player in business intelligence and CRM. The business has 2,500 employees in France and internationally, and the deal further advances Orange Business Services’ strategy of expansion aimed at becoming a global player in digital transformation and a leader across data services. Atos was another player that was highly active – and the Paris-listed company simultaneously acquired three healthcare IT consulting businesses in the US, adding around 400 healthcare consultants to its team.

Media consumption

In the media space, which saw a growing number of consultancies invest in design agencies last year, Dentsu Aegis Network's mcgarrybowen acquired Swirl, the largest independent advertising agency in San Francisco. Innocean Worldwide, the advertising agency of Hyundai Group, acquired LA-based David & Goliath. Around 60 deals were closed in human resources, while despite rising oil prices, there was a sharp decline in deal flow in the engineering consulting sector, with total deals dropping to around 40.

From a regional perspective, North American firms were the busiest with dealmaking, closing 296 deals, up 3% on the previous quarter. In Europe, deal flow fell by 13% quarter-on-quarter to a total of 197, with the continent’s deal size around $11 million lower compared to North America. Asia Pacific and Australia saw 87 deals completed.  

Commenting on the predictions for 2018, David Jorgenson, CEO of Equiteq, said that the firm’s data shows that there is a strong appetite for M&A as 2018 commences. Jorgensen explained, “Many of the prolific buyers of consulting firms that we are in dialogue with are preparing strategic plans to penetrate new markets via acquisition in 2018. We are also receiving substantial demand for strategic advice from owners that have received recent unsolicited interest in their consulting firms and want to benchmark this against buyer demand.”