- Activity varied across the knowledge economy – management consulting was the top segment for deal flow, which grew by 5% over 2017
- Hot areas for buyer demand include digital transformation consulting, robotics & artificial intelligence, advanced data analytics and healthcare consulting
- North America and Europe accounted for 85% of global M&A deal flow
- Cross-border M&A remains structurally higher in APAC and accounted for almost 30% of deals in the region
- The Equiteq Knowledge Economy Share Price Index rose by 8% and touched new highs over the year
In 2017, there were large variations in M&A activity across segments. Overall deal volumes dipped by 5%, but there were notable deals across increasingly converging segments. The top space for growth in deal activity was the rapidly evolving management consulting segment, following by the media agencies space. Strong deal activity across the knowledge economy is being underpinned by a solid global economic outlook, as well as continuing demand for growth and substantial capital available for deals by strategic buyers and private equity investors. As in-demand segments continue to experience shortages of people with requisite skills, demand for acquisitions of niche capabilities at premium prices is rising.
These and other findings were published in Equiteq’s The Knowledge Economy Global M&A Report 2018.
David Jorgenson, Equiteq’s CEO, says:
“We are seeing knowledge-intensive services providers under enormous pressure from a rapid wave of disruption led by an accelerating trend of technology-enabled innovation. We are seeing a continued blurring of boundaries across all firms utilizing intellectual capital, not just consultancies but also software and managed service companies. Looking ahead, there is an unparalleled opportunity for pioneering business owners and entrepreneurs to create value and make profitable exits within the disruption zone of the knowledge economy.”
Major upheaval of the consulting industry`
As corporations are driven to transform their own businesses by leveraging (or responding to) digital, they are becoming more sophisticated consumers of consulting services and changing how they consume expertise. This is driving transformations in many traditional consulting firms’ business models, as well as the broadening of their digital transformation advisory offerings. In the constrained talent market, this is resulting in new vertical and horizontal mergers that are redefining the consulting sector. Examples of such deals include Gartner’s acquisition of CEB, BCG’s acquisition of MAYA and Office Depot’s purchase of CompuCom.
APAC continues to be a focus for cross-border M&A
In 2017, cross-border M&A accounted for 22% of all deals. Deal flow across countries remains structurally higher in APAC, particularly within IT services and media agencies. While the knowledge economy in APAC is not as advanced as in Europe and North America, globalization, economic development and rising adoption of new technologies are driving international demand for specialist businesses in the region. At the same time many cash rich buyers, notably from Japan, Australia, but also China and India, are using M&A as a tool to expand internationally, reducing their dependence on local markets.
Top space for growth in deal activity was management consulting, followed by the media agencies segment
M&A activity in the management consulting sector rose 5% in 2017, with M&A across
adjacent industries being a key theme in the space. Strong pricing and competition for assets is also being supported by rising valuations of listed consulting buyers, with substantial capital available for M&A and a desire for new avenues of growth. Deal flow in the media agencies space grew modestly by 1%. Contraction in activity from the struggling leading agency networks was offset by an increase in activity from private equity firms and other strategic buyers, including those from adjacent industries.
2018 outlook is strong
The global economic outlook for 2018 is strong and we expect the strong industry trends underpinning M&A activity across the knowledge economy to continue over the next twelve months. The development of new digital technologies in spaces like automation, blockchain and augmented reality will have a major impact on business models across sectors over the long term. The pace of adoption of these technologies will dictate where we see the most M&A activity over the next few years.
Equiteq’s Knowledge Economy Global M&A Report 2018 is available to download for free by clicking here.
Join Equiteq’s webinar here where they will be discussing findings from their new 2018 M&A report, providing you with data and insights on the global market trends and buyer universe in 2018.
5 June 2018
4pm – 5pm BST / 11am – 12pm EST
About Equiteq (www.equiteq.com)
Equiteq is the knowledge economy M&A specialist, advising owners of knowledge-intensive businesses around the world from offices in London, New York, Singapore, and Sydney. Equiteq helps owners best achieve their value and exit objectives through accelerating equity growth and ultimately realizing that value in a trade or private equity sale.
About Equiteq’s Knowledge Economy M&A Report 2018
The Knowledge Economy M&A Report 2018 is the only publicly available information on the Global M&A market. It covers knowledge-led firms across all major industry segments including: management consulting, engineering consulting, HR consulting, IT services and media agencies. The full report can be downloaded free from: https://www.equiteq.com/equiteq-edge/m-a-intelligence/the-knowledge-economy-global-ma-report-2018/