Consulting Sector M&A Deals for week beginning 22nd September

businessman doing handstand on the beachRPS Group plc. (UK) to acquire Point Project Management (Australia)
Deal Size: $27.7 million Industry: Management consulting / Strategy Date: September 2014
RPS is acquiring the entire share capital of Point for A$31.0 million (€21.5 million), all payable in cash. Founded in 2006, Point Project Management is headquartered in Canberra and has offices in seven other Australian cities. The company, which employs approximately 130 permanent staff, provides services to the defence, transport, residential, retail, health and commercial property development industries. “Point has an excellent reputation and track record, particularly in the Australian defence sector. Its skills will complement the services RPS currently provides in Australia and enable us further to rebalance our business towards the non-resources parts of the economy,” said RPS chief executive Alan Hearne. Point Project Management Pty Ltd offers project management consultancy services. RPS Group PLC provides advice for the exploration and production of oil and gas and other natural resources; and development and management of the built and natural environment.

Arthur J Gallagher & Co. (USA) acquired The Benfield Group LLC (USA)
Deal Size: Unspecified Industry: Healthcare consulting Date: September 2014
Arthur J. Gallagher & Co. has declared the acquisition of The Benfield Group. The move marks an effort by the company to ramp up its employee benefit business. St. Louis-based Benfield Group is a healthcare market research, strategy and communications firm offering services in the U.S. It specialises in helping healthcare companies and enabling them to develop and implement effective employer strategies. It also conducts research on consumers, patients and physicians, thereby providing employers with strategic communications support. Hence, with this acquisition, Arthur J. Gallagher has added another feather to its cap. Arthur J. Gallagher has been focused on its employee benefit business and has been consistently strengthening the same. Its year-to-date acquisition tally touches 28, out of which 10 acquisitions, including the latest one, are in the employee benefit business. Arthur J. Gallagher & Co., together with its subsidiaries, provides insurance brokerage and risk management services in the United States and internationally. The Benfield Group LLC provides health care market research, strategy, and communications services in the United States.

The Aldridge Company, Inc. (USA) acquired Tydan IT (USA)
Deal Size: Unspecified Industry: IT consulting Date: September 2014
Two major Texas MSPs have combined forces to provide first-response support and better serve small and medium-sized enterprises (SMEs). Technology management and consulting company Aldridge has acquired Tydan IT, a provider of managed IT services concentrated in the Austin area. Aldridge, a leading provider of information technology (IT) outsourcing with elite first-response support, announced the completion of its acquisition of Tydan IT, a managed IT services specialist for small and medium-sized enterprises (SMEs) in the Austin, Texas area. Terms of the agreement were not disclosed. Clients of Tydan IT will benefit from accessing Aldridge’s mature and growing managed services practice. By providing senior knowledge on a daily and ongoing basis, Aldridge simplifies IT operations and provides faster resolution of IT issues. Tydan IT’s personnel will be retained and integrated into Aldridge’s operations. Aldridge has appointed Tydan IT Founder and CEO, Mark Glowacz, as Vice President, and he will lead Aldridge’s growing Austin office. Glowacz will report to Aldridge President and COO Patrick Wiley. “Austin is booming with a lot of startups as well as established and growing companies that are open to business best practices and can now benefit from outsourcing their IT management to Aldridge,” said Glowacz. With the Tydan IT acquisition, Aldridge enables business executives in the Austin area to save time, energy and money through a broad range of outsourced custom IT services, such as: Managed services, Professional services, Could services. The Aldridge Company, Inc. operates as a technology management, consulting, and outsourcing company in the United States. Continue reading

The Myth of the ‘Hungry Buyer’

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The myth of the ‘hungry buyer’ is one of the most prevalent and dangerous traps that you can fall into as an inexperienced seller. There is a common belief that the success or failure of a deal rests on how much a buyer wants to acquire your company, as opposed to a forensic analysis of how it will generate future profit streams. This is not always the case and this belief can harm your prospects on making the deal happen.

If sellers focus on the ‘hungry buyer’ myth, they are likely to concentrate too much on getting emotional buy-in. While there is a need to build up momentum and entice the buyer throughout the process, it is more important to develop a clear buyer proposition, based on real evidence, as to why your business is of value to them.

What should the buyer proposition be based on? One of the key elements is that it needs to be tailored to the potential buyers and their needs, at all stages in the process, not just during negotiations. For example, when approaching a pool of say 100 potential buyers with the initial blind profile, or teaser, you can’t expect to generate positive responses across the board if these documents are not tailored to the typical needs of each category of buyers in the pool. You need to understand what their needs are and why they would be interested in a company like yours. This is one of the key roles of an intermediary such as us.

By starting with buyer categories and drilling into specific buyers as the sale process progresses you can develop the ‘story’ of the business in a way which relates to what the buyer wants. You can highlight your strengths and strategy in a way which is most relevant to what the buyer wants and also address any concerns they may have at an early stage. This will help increase the chances of hooking their interest, both emotionally and logically based on a future profit business case, and help them be prepared to pay a premium price when the case is signed off at board level.

The second purpose of a buyer proposition is to build trust and confidence in what you are selling. It is very easy to present an overly rosy picture of how your business is going to perform in the future. However over optimistic forecasting is often revealed at the due diligence stage and can potentially lead to a breakdown in negotiations, or at least a reduction in the equity value.

What’s important in the proposition is to demonstrate hard evidence for the reasons you’ve achieved your historical performance levels. You also need to show that the same methodology has been applied to calibrating the forecasts included in your proposition. In this way, the potential buyer is more likely to believe and accept the forecasts you have produced. You can find out more about how to value your consulting business at Equity Edge, our free online resource tool.

While it’s important to put together a compelling package, backing this up with the facts and evidence is key. If you can put this into practice, you will give a potential buyer all the right reasons to invest in your company, which will increase your chances of both doing a deal and achieving the value you believe your business is worth.

Consulting Sector M&A Deals for week beginning 15th September

businessman doing handstand on the beachValuesetters Inc. (USA) acquired The Mac Venture Group Inc. (USA)
Deal Size: $200,000 Industry: Management consulting / Strategy Date: September 2014
Valuesetters Inc. announced that it has acquired MAC Venture Group LLC for a purchase price of $200,000. MAC will operate as a wholly owned subsidiary of Valuesetters. Valuesetters’ Chief Executive Officer, Manny Teixeira, said, “MAC is an important acquisition for us. In conjunction with the deal, we acquire an experienced executive, Patrick Cahill, to lead our sales and business development efforts. MAC expects minimum annual revenues of $250,000, but Patrick’s goal is to reach $1 million in the first year.” “I am eager to help Valuesetters grow quickly,” noted Mr. Cahill. “I like the small investments that Valuesetters has made in other companies, and I believe that will continue. I also see many possibilities for its song platform and VoIP app. I look forward to working with the team to increase the value of our products and our equity.” MAC Venture Group, Inc. offers sales and marketing consulting services. Valuesetters, Inc. operates as an Internet-based gaming company.

Hot Rock Limited (Australia) acquired OCTIEF Pty Ltd (Australia)
Deal Size: $4.2 million Industry: Environmental consulting Date: September 2014
Hot Rock has completed its acquisition of environmental consulting and hazardous materials testing business OCTIEF Pty Ltd. OCTIEF carries out studies, including mine sites, contaminated land sites, buildings, soils and water, which need to be done as part of government and council development approvals for new project developments. The acquisition of OCTIEF has allowed the Company to remain in the important environmental sector for the improvement of the health of our planet and society and at the same time operate a growing business so as to improve shareholder value and generate sustainable and profitable performance. Acquiring OCTIEF provides the Company with a new opportunity which is based on market strength and growing profit potential. OCTIEF Pty Ltd., a multidisciplinary consulting company, provides engineering, environmental, and occupational services. Hot Rock Limited, a geothermal energy company, is engaged in the exploration of prospective geothermal energy prospects in South America and Australia.

Kantar Health LLC (USA) acquired Evidências (Brazil)
Deal Size: Unspecified Industry: Healthcare consulting Date: September 2014
Kantar Health, a leading global healthcare consulting firm, has acquired Evidências, an industry leader in evidence-based, health management services in Brazil. Known for its strong scientific reputation, Evidências works with all segments of the Brazilian healthcare market, including health insurers, government bodies, hospitals and providers, and pharmaceutical and medical device manufacturers. The acquisition expands Kantar Health’s presence in an important emerging market and provides the company with new capabilities in cost effectiveness and budget impact economic models, local dossier submission packages and professional writing. Kantar Health also receives valuable expertise in the DATASUS governmental database and a key private insurance database covering 20 percent of the privately insured population in Brazil – offering a complete picture of the healthcare sector in the country. Evidências gains access to Kantar Health’s leading data assets and global team of healthcare consultants, allowing Evidências to strengthen its work in evidence-based medicine and further extend its range of services in consulting, market access and training. Through this acquisition, Kantar Health will be able to provide better coordination of market access and health outcomes in Brazil, while allowing both companies to expand their current client bases and deliver local support for Kantar Health’s National Health and Wellness Survey, CancerMPact®, Forecast Architect® and Epi Database® offers. Evidências provides healthcare-focused consultancy and marketing insights services. Kantar Health LLC, a subsidiary of WPP, provides healthcare-focused consultancy and marketing insights services in the United States and internationally. Continue reading

Profit from your hidden IP

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Intellectual Property (IP) is the primary asset and source of profit for people businesses like consulting.

In a consultancy, IP refers to the knowledge, experience, tools, techniques, case studies, training materials, client lists, relationships and similar assets that belong to your firm. However, in more cases than not, these assets exist in the minds and on the computers of individuals within your firm. Unless IP is securely imbedded internally, this poses risks to your business: if the individual leaves your assets leave too!

There are three main benefits of building IP into your firm:

  • Speed up growth
  • Increase competitiveness
  • Build equity value

Speed up growth

Faster growth is achieved through leverage. Leverage occurs because knowledge can be packaged into consulting tools used in delivery processes. This makes it easier to induct new consultants and reduces reliance on senior consultants by enabling junior consultants to deliver at a repeatable level of high quality to the client, which in turn, delivers higher project profitability.

Increase competitiveness

By utilizing the knowledge and experience from senior consultants, you should produce publications that expose your content to a wider audience and consequently, increase credibility within your space. Additionally, if you package content into consulting delivery tools it will increase client reliance on your IP and make it harder for your competitors to encroach on your relationships. There is something very elegant about increasing client dependency on your firm and reducing your reliance on senior consultants in the process.

Build equity value

If you are considering selling your firm, building IP internally removes growth constraints and induces scale-ability, which results in an increase of equity value. Your buyer can take what you do with 50 consultants and quickly leverage your process to 1000 consultants in new clients and markets. Additionally, by extracting the knowledge from your staff it reduces the fear that buyers may have of your employees leaving your firm following the acquisition, taking clients and methods with them. Losing key staff is less of a threat to the buyer if IP is securely imbedded into the fabric of your firm prior to acquisition.

How can you capitalize on your IP?

Setting up an effective IP development and management process that harnesses knowledge and utilizes it both internally and externally is vital. This could be in the form of case studies for marketing purposes or publications directed at your target audience to build credibility.

The most important driver to capitalizing on your IP however is to package it into consulting delivery tools that provide the leverage discussed earlier.

If standardization isn’t firmly imbedded within your firm, the opportunity for inconsistencies may appear. The goal is to create tools using scale-able technology that results in a more efficient delivery of client projects, which in turn, produces consistent results.

These tools should ideally:

  • Combine wisdom of the firm into one set of diagnostic questions
  • Act as a knowledge base for supporting content for consultants and clients
  • Be easily implemented using online technology
  • Link the gap between current performance and potential to a cost or value

IP is one of our 8 Levers of Equity Value. The 8 levers contain 80 of the most important measures that a sophisticated buyer would look at to evaluate the risk in your business. Read our article to find out more.

Consulting Sector M&A Deals for week beginning 8th September

businessman doing handstand on the beachVertex Resource Group Ltd. (Canada) acquired Navus Environmental Inc. (Canada)
Deal Size: Unspecified Industry: Environmental consulting Date: September 2014
Vertex Resource Group Ltd. is pleased to announce that it has acquired Navus Environmental Inc., an environmental consulting firm servicing the oil and gas and mining industries, within Alberta, British Columbia and Saskatchewan. Navus employs over 100 professionals from its offices in Edmonton, Alberta, Fort McMurray, Alberta and Fort St. John, British Columbia. Founded in 2005, Navus is an industry leading environmental consulting firm specialising in remediation, environmental planning and reclamation. In addition to these core services, Navus’ professionals also specialise in spill response, hydrogeology, soil mapping, peat harvesting, botany, revegetation/restoration planning, wildlife, aquatics and geomatics. Terry Stephenson, President of Vertex stated: “In addition to complementing Vertex’s already well-established land and environmental consulting services, the acquisition of Navus will greatly enhance our service offerings and technical expertise in the oilsands and mining industries. We are really excited about the talented Navus management and staff that will be joining our organisation and believe this will be a very transformational acquisition for our environmental consulting practice; allowing us to better serve both of our customer bases. Cultural fit was a major deciding factor for both Vertex and Navus in contemplating this partnership. Navus has a well-respected reputation for superior customer service, innovation, teamwork and collaboration which aligns well with the culture at Vertex.” Vertex Resource Group Ltd. provides consulting, construction, and rental services to oil and gas, mining, utilities, infrastructure, and real estate sectors primarily in Alberta and Western Canada.

Ryan, LLC (USA) acquired Definitive Consulting Services (Canada)
Deal Size: Unspecified Industry: Management consulting / Strategy Date: September 2014
Ryan, a leading global tax services firm with the largest indirect and property tax practices in North America, announced that the Firm has acquired Definitive Consulting Services. The acquisition adds a team of experienced Canadian tax professionals to provide additional knowledge and client support that strengthens the Firm’s industry-leading Canadian Sales Tax practice. It also adds a large complement of respected Canadian companies to Ryan’s portfolio of clients across North America. “Ryan and Definitive clients will benefit tremendously from the unparalleled tax knowledge, expertise, and commitment to client service that our newly combined team of Canadian tax professionals will provide,” said Garry Round, Ryan President of Canadian Operations. “This acquisition launches a new phase of Canadian growth and market leadership for our Firm, and the professionals of Definitive will play a key role in our future success.” Ryan & Company, Inc. provides tax consulting services.

WorleyParsons Limited (Australia) entered into an agreement to acquire MTG, Ltd. (USA)
Deal Size: Unspecified Industry: Management consulting / Strategy Date: September 2014
WorleyParsons is pleased to announce an agreement to acquire MTG, Ltd. MTG is a US based management consulting firm in the oil and gas, petrochemicals and chemicals industries with operations in North America, the United Kingdom and Australia. MTG specialises in improving operational performance across every aspect of the exploration and production, midstream, refining and marketing, petrochemicals and chemicals industries. The company has a 30 year history of providing strategic management advice and will provide Advisian, WorleyParsons’ advisory business, with deep strategic skills in business transformation. David Henderson and Jim Nichols, partners of MTG, Ltd said: “On behalf of the MTG organisation, we are very excited to join Advisian and the WorleyParsons Group. The combined capabilities and resources of our two companies will enable us to broaden the services that we provide to our clients as well as expand our geographic footprint.” MTG, Ltd. provides consulting services for projects across various aspects of the exploration and production, midstream, refining and marketing, petrochemicals, and chemicals industries worldwide. WorleyParsons Limited provides professional services to the resources, energy, and industrial sectors. Continue reading

Nine steps for selling your consulting business successfully

 

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This blog will give you an overview of the nine steps involved in a quality sales process. Taking you from valuation to company disposal with minimum pain along the way.

To ensure the process runs smoothly and to mitigate any risks, as well as maximising the value of your firm, adequate planning and preparation is the key.

Step 1 – Initial valuation and market risk assessment

In the first instance, it is crucial to establish a target valuation and identify any potential issues that may affect your sale. To place yourself in a strong negotiation position with your bidders, it is important to have an understanding of the following factors:

  • Return on Investment (ROI) based on your current financial performance and growth prospects
  • Buyer risk factors that may cause them to downgrade your firm’s value
  • A market premium based on current market activity
  • A synergy factor based on your ability to positively impact a buyer’s business

Our Valuation and Market Risk Assessment process assesses the risk factors that may cause problems or affect the maximum value. Once identified, you can put a plan in place to mitigate or eliminate the risks and maximise the value of your firm in the process.

Step 2 – Maintaining business as usual

Ensuring there are sufficient resources to manage business as usual activities and the on-going growth of the firm, in addition to the sales process is another vital step. Failure to do so may cause delays in the sale or reduce the initial price of the firm. It may be beneficial to employ advisors at this stage to reduce the management load of the sale process.

Step 3 – Building the buyer list

Using the intelligence from your team and your M&A advisor, form a list of 40 or more potential bidders/buyers who may be interested in acquiring your consulting company. Categorise the list into groups based on a view of their potential synergy with your firm. Synergy factors can dramatically affect the price achieved so it’s important to develop a strong story about synergy, customised for each buyer group.

Step 4 – Preparation of sale documentation

Your M&A advisor will be required to collect and produce the appropriate documentation in preparation for the sale of your firm. This comes in three forms:

  • The ‘Blind Profile: a two-page marketing document containing the financial, operational, service and client details without disclosing the name of your firm. It will also highlight the buyers’ synergy with your firm and may be slightly altered to target different categories of buyers.
  • The Information Memorandum (IM): a 30-page document containing all strategic, financial and operational information. This includes financial history and projections, service line descriptions, clients and markets, staff and compensation, assets and liabilities, firm strategy and reasons for the sale.
  • A compelling management presentation needs to be produced that can be customised and used in initial meetings with bidders.

Step 5 – Lining up legal and tax planning experts

Engage lawyers and tax planning experts early to minimise or avoid any issues that may impact on organisational structure and remuneration, contracts, shares, liabilities or company incorporation. Your M&A advisor will be able to recommended a trusted expert if you don’t have access to one.

Step 6 – Engaging the buyer list

With all prior background work completed, you can now start contacting your buyer list to begin the sales process. As an initial step, send out the Blind Profile then follow up with a phone call or email to establish interest and pre-qualify buyers.

Interested buyers will then be invited to sign a Non-Disclosure Agreement (NDA) preventing them from releasing information to third parties and reducing the risk of them poaching your staff should they be unsuccessful in buying your firm. These buyers will also receive a copy of the IM so they’re aware of the benefits of their purchase.

Step 7 – Initial offers from interested buyers

Those that wish to progress further will wish to meet the Management team. This will provide you with the opportunity to impress bidders by highlighting the quality of your firm as well as the aligned synergy elements relevant to the buyer.

Offers will comprise a total value and the proposed structure of payment but pay attention to both the relative value of the offers as well as any contingent risks. They may not necessarily provide the maximum offer value but perhaps offer a higher value upfront with the remainder of the consideration in safer, non-contingent financial instruments such as bank-guaranteed loan notes.

There may be several meetings with each bidder before indicative offers are made and the competitive nature of this bidding process will help to maximise the value of each offer.

Step 8 – Heads of terms and due diligence

Once you’ve chosen a successful buyer, you will need to request a ‘Heads of Terms’ document which describes the detail of the offer subject to successful Due Diligence (DD). You then enter a period of exclusivity where you’re prevented from progressing a sale with another third party.

The buyer will typically have four weeks to perform their DD, which includes financial, legal and potentially commercial and HR. In most cases, the buyer will wish to speak to one or more key clients so you will need to manage this part of the process carefully as not to expose your relationship with the client.

Step 9 – Signing the sale and purchase agreement

Your lawyer will then draw up a Sale and Purchase Agreement, together with warranty and disclosure documents for signature. If you’re certain the DD will not expose any problems and you’re comfortable taking the risk on legal fees if the sale doesn’t progress, the legal and DD process can be done in conjunction with each other.

Unless you’re lucky enough to find a buyer prepared to knock out other potential bidders, the entire sales process will take around six to nine months. You will need to be aware of any external factors that may cause a delay such as a market collapse or a key client who ceases doing business with you. Additionally, the longer the sales process, the higher the risk that something will come out of the woodwork for you or your buyer so keep this in mind.

If you have any questions about this process, we have started a discussion in our Equity Edge LinkedIn Group. Our experts will respond to any of your comments or questions.

Equiteq sells Finnish consulting and market intelligence firm

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We are pleased to announce the sale of our client, Global Intelligence Alliance Group (GIA), to M-Brain.

GIA is a strategic market intelligence and advisory group, formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.

M-Brain is a European based information services company with offices in seven countries. M-Brain offers media and business intelligence solutions, analytics and consultation services, as well as online intelligence tools and technology to bring insight into its clients’ business environment.

“GIA is an exceptionally well-managed business” said Dan Bowtell, the Equiteq lead advisor to GIA. “Since inception, it has been at the forefront of development in strategic Market Intelligence. GIA’s unique, high quality services generated significant interest in the business, particularly from overseas acquirers. However, M-Brain provided the most compelling deal. The combination of two businesses creates a group with complementary global operations and substantial future growth opportunities.”

Commenting on the growth and sale process for GIA, Markko Vaarnas, CEO and co-founder of GIA said: “This process started a year ago with a consulting project during which Equiteq helped our management team to identify the value growth levers for our business. Looking back, the decisions we made at that time proved to be highly valuable and we were able to boost our profit growth significantly. This had a major impact on the way we presented the company in discussions with prospective acquirers and ensured we achieved a successful outcome for all shareholders.”

Following the sale of Equiteq client ACE International to AECOM, this latest successful sale is further evidence the market is turning a corner and that 2014 is likely to see significant growth in volumes and prices, as our Global Consulting Mergers & Acquisitions Market Report 2014 suggests.

We have extensive resources that provide information as to what firms can do to make themselves attractive to buyers in the Growing equity value in your business section within our online resource, Equity Edge.