| The early stages of a consulting rebound are often times when consulting firm owners decide to cash-in, through some form of sale or flotation of the business; with valuations typically running at 1-2 times revenues, even a small consultancy with revenues of say £10m / $15m can fetch quite a price if sold to a competitor or floated on the stock market. |
| Management consultancy M&A activity back in vogue? |
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| | Founder and former CEO
of WCI Paul Collins
believes there is
considerable scope for
consulting firm owners
to build up equity in
their businesses and
realise this through a
sale in the coming 18-24
months. He's so
convinced this will be a
hot topic in 2005 that
he's been organising an
event aimed specifically
at bringing together
consulting firm owners
and potential acquirers.
Certainly there have
been signs of renewed
interest in consulting
acquisitions these last
few months - and as the
consulting rebound
gathers pace, interest
amongst potential
acquirers is likely to | |
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| | Partners Inc. The latter
is an example of how a
new firm on the block
can quickly generate
equity value and pull
off a successful sale
within just years of the
firm being founded.
Sergio Zyman, former
chief marketing officer
of Coca Cola, built the
130 strong consultancy
in just 5 years,
achieving annual
revenues of $65 million.
The sale of 61.6% of
Zyman Group has netted
the owners $63.8
million, not a bad
return for 5 years'
work!
Collins, who himself
sold part of his
consultancy WCI to
venture capitalists in
2002, believes there are | |
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| | some key foundation that
are critical to
achieving a successful
sale. For example
Partners must structure
their businesses so that
business development is
embedded as a firm wide
activity - so that the
value of the consulting
firm doesn't reside with
just the few senior
Partner figures. The
latter scenario is a
highly risky proposition
for the acquirer and
decimates any valuation
of the business.
“By breaking up the
(sales) pipeline you
make it more difficult
for senior people to
leave because they don’t
own the total pipeline,”
says Collins. “You can
also benefit from the | |
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| | whole panoply of
marketing tools which
most consultancies don’t
use because their
rainmakers are working
personal networks.”
Such an approach
creates robustness and
predictability of profit
growth, which is what
City investors look for.
“You put the (sales)
pipeline in a box and
manage it to death,”
concludes Collins.
“That’s the thing
that delivers profit
growth over time - the
business becomes a
numbers game.”
Find out more about
Paul's strategies to
build and sell a
consulting firm by
clicking here | |
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| | accelerate. Activity
this last week has been
especially brisk, with
Accenture acquiring the
US healthcare practice
of Capgemini and Zyman
Group being sold to MDC | |
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