April 20, 2016

PE-Backed Platforms Ramping Up Acquisition Activity in the Professional Services Sector

For the last several quarters, we have been talking about the increase in PE activity in the consulting sector. As evidence of this continuing trend, there has been a recent flurry of deals including:

  • Madison Dearborn-backed Ankura Consulting Group’s acquisition of MGBD (Turnaround Consulting)
  • Primary Capital Partners-backed MARU Group’s acquisition of Vision Critical Research and Consulting (Customer Consulting)
  • Tailwind Capital-backed Cumberland Consulting’s acquisition of Oleen Pinnacle Healthcare Consulting (Payer Consulting)

This activity over the past couple of weeks is not coincidental. Private equity groups are continuing to put more of their plentiful capital to work and the M&A market for consulting firms continues to reward growth over all else. Some PE groups have decided that, given current market conditions, now is the right time to seek an exit; however, interestingly many of those that have decided now is not the time (perhaps because of their hold period), are now themselves actively seeking to acquire. This need to “act,” is likely driven by the market’s focus on growth as the primary driver of value. The PE groups who have decided not to sell believe supplementing growth (including via acquisition), despite a pricey environment, is a value-maximizing strategy. Buying when the market is hot is counter to traditional thinking and is an indication that many believe the robust consulting M&A market is going to continue for some time. Regardless of the reason, this type of activity serves to further bolster what is already a very strong M&A market for consulting firms.