We're a Baker Tilly network member
Learn more
The rise of consultancies to drive M&A activity
Article

The rise of consultancies to drive M&A activity

A rise in the use of external advisors by the public service and large listed companies is set to drive a new wave of M&A activity in the consulting sector.

The growing use of consultants, by the public service in particular, has been the subject of significant debate in recent months, with some arguing that outsourcing advice devalues the role of professional public servants and turns them in to “mailboxes” for consultant advice to Ministers.

Others, however, argue that the increasing complexity of public policy challenges make it essential to draw expert advice from a wide range of sources.

Regardless of the viewpoint, the evidence shows consulting firms are doing well in Australia. A recent report from Source Global Research found the value of the local advisory market soared to A$7.7 billion in 2018, up nearly 8 per cent from already high levels in 2017 – a rate three times faster than that of the economy as a whole.

There is clearly an increased demand for consulting services, which is creating a shortage of experienced consulting staff. This not only drives up prices and margins but also makes consulting businesses with quality staff potentially attractive acquisition targets.

With only a limited number of potential acquisition targets in Australia, this is likely to drive up acquisition prices in terms of revenue multiples – and indeed there are already signs of this happening.

In June, Accenture announced the acquisition of the privately-held advisory firm BCT Solutions, which services the defence and national security sector. The reported purchase price of A$20 million represents a healthy revenue multiple of more than two.

Accenture followed this up with the recent purchase of big data and analytics consultancy Analytics8, which is also privately held. While terms of the transaction have not been reported, we expect that the price would reflect similarly healthy revenue multiples.

These recent transactions are likely to reflect a broader trend of increasing interest in Australian acquisitions from the large global consulting firms – but also potentially a round of consolidation amongst local players.

There is no doubt that there are buyers in the market for high-calibre Australian consulting firms and their skilled staff, and we might expect M&A activity – and prices – to continue to increase as a result.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.
Pitcher Partners insights Get the latest Pitcher Partners updates direct to your inbox

Thank you for you interest

How can we help you?

Business or personal advice
General information
Career information
Media enquiries
Contact expert
Become a member
Specialist query
Please provide as much detail to ensure appropriate allocation of your query
Please highlight a realistic time frame that will enable us to provide advice within a suitable and timely manner. Please note given conflicting demands with our senior personnel, we will endeavour to respond to you within the nominated time frame. If you require an urgent response, please contact us via [email protected] or 03 8610 5477.
CPN Enquiry
Business Radar report
Student careers 2021-22
Find an expert
Search by industry