Business Services Sector Comment – October 2016 – Consulting

There is no doubt that over the last 12 months the high levels of M&A activity in the consulting sector have been led by technological trends primarily in big data, cybersecurity and digitalisation markets. This month, however, saw the acquisition of two high-profile strategy divisions as acquirers look to expand their sector-specific capabilities and deepen geographic coverage.

The first deal came from Accenture, which continues its targeted M&A strategy by acquiring Kurt Salmon’s retail and consumer goods consulting business. The transaction which will provide geographic expansion for Accenture in the UK, Germany, Japan and China, will also help to enhance its expertise in operational strategy consulting. Upon completion, Kurt Salmon will be integrated into the group’s strategy division, an area the group has been particularly acquisitive having acquired retail strategy consultancy Javelin Group last March. The Kurt Salmon transaction is also transformational for loss-making Management Consulting Group who will welcome the €147m cash consideration generated from the disposal and allow the group to exclusively focus its efforts on turning around its retained business, Alexander Proudfoot. Earlier in 2016, the LSE-listed consultancy completed the sale of certain operations of Kurt Salmon to France-based Solucom for €84m.

The second deal was completed by EY, who following the acquisition of strategy consultancy Parthenon nearly two years ago (now rebranded as Parthenon-EY) are pursuing inorganic opportunities as they look to strengthen their business advisory and strategy services across Europe. The purchase of OC&C Strategy Benelux helps to fulfil that plan and provides a template for further acquisitions with a focus on the French, UK and German market. This deal follows hot on the heels of Oliver Wyman’s acquisition of the Hong Kong and Shanghai franchises as well as the Boston office of OC&C Strategy Consultants in August 2015 and December 2014 respectively.

Whilst the Big Four accounting firms have been busy expanding their global consulting capabilities through M&A, the largest strategy firms (McKinsey, BCG and Bain) have persisted with an organic growth strategy supplemented by selective acquisitions, as evidenced by two further examples this month – BCG acquired Germany-based procurement specialist Inverto AG, while McKinsey acquired US-based practice management analytics software firm PriceMetrix. Both deals are in line with the consulting firms’ strategy of acquiring technology-led businesses that help build on their analytics, digital and intelligence offering.

Here at Clearwater International, we believe we will continue to see high levels of bolt-on M&A activity as companies look to develop sector specific solutions or target acquisitions that build capability.


Other notable deals

Deutsche Post AG, the world’s largest mail and logistics group, has agreed to acquire UK Mail Group plc, a listed UK-based postal operator, for approximately €281.7m.

Equistone Partners Europe, a UK-based private equity investor has acquired an undisclosed majority stake in Apogee Corporation Ltd, a UK-based print managed services provider, in a transaction valuing the company at approximately €220m.

Urbaser SA, the Spain-based waste management business of Actividades de Construcción y Servicios (ACS) has agreed to be acquired by Frion Investments, a Chinese-controlled investment firm for an enterprise value of between €2,212m and €2,463m, depending on certain future parameters.

Sailing Capital Advisors, a Hong Kong-based private equity fund, has acquired Astrum Education Group, the UK-based group of sixth form colleges from Sovereign Capital, the UK private equity Buy & Build specialist, for an undisclosed consideration.

de Poel, a UK-based neutral vendor recruitment outsourcing specialist has been acquired in a management buyout transaction for an undisclosed consideration. The deal will allow for the further expansion and continued development of products, technology and sector-specialisms.

Spectris plc, a listed UK-based productivity-enhancing instrumentation and controls company has acquired Millbrook Group Ltd, a UK-based vehicle and tyre test, validation and engineering service provider, from Rutland Partners. The purchase price of €145m represents a 12-13x EBITDA multiple, on a proforma basis.

Turners (Soham) Ltd, a UK-based haulage company has announced the acquisition of Goldstar Transport, the second largest container operator in the UK. This acquisition fits with Turners long term ambition to expand its presence within the container industry and will increase the Group’s annual turnover by over €110m.

CDI AndersElite Ltd, a UK-based technical recruitment agency, has been acquired in management buyout from US-based parent CDI Corp., for a total consideration of €6.1m. As part of the deal, CDI will maintain a minority stake in the new entity.

Germany-based SPIE GmbH, a fully-owned subsidiary of multi-technical services provider SPIE group, acquired AGIS Fire and Security Group, a Poland-based provider of electronic security and fire protection systems. With this acquisition, SPIE strengthens its geographical footprint mainly in Poland and Hungary.