M&A intent cools across consulting sector

Merger and acquisitions activity in the professional services firm cooled in the last 12 months. New research suggests this is particularly the case in the UK, where deals were six points below the global average, and the consulting industry, where only 7% are now looking to make a purchase.

Over the past five years, M&A activity has been high in professional services. Looking back on the period, researchers from Unit4 believe this reflects “a rapid consolidation in this industry and demonstrating a highly dynamic market”. However, a global slowdown in the market – resulting from spiralling inflation delaying many client projects – has seen the situation shift dramatically.

According to a study of 600 professional services leaders in the US, the UK, France, the Benelux, the Nordics and the DACH region, 58% of firms in the sector acquired another company. Meanwhile, 48% were acquired. But complexities around integration seem to have prevented a greater number of organisations from taking the plunge into the M&A market.

Source: Unit4 

Management consultancies actually saw activity above the average over the last five years. A 62% majority acquired a firm, while 56% had been acquired. But looking ahead, the trouble the sector currently faces – with research suggesting revenues fell for the first time since the pandemic – the future looks less rosy.

Slowing market

Only 7% of consulting firms said they would look to acquire another organisation in the future. While all forms of professional services firm saw this metric decline compared to previous activity, consultancies exhibited the least confidence. In comparison, 39% of ‘other business and professional services’ said they would look for an acquisition.

Source: Unit4

Extended acquisition times may be suppressing demand in this way. Consultants said it took an average of 10 months to integrate new company systems following a deal, while it took 8 months to integrate financial processes and data. Unit4 found that only media and publishing firms were more likely to complain of complexities in the purchasing process.

Consulting firms in the UK may be even more exposed to these pressures. The market was already the lowest of all the regions Unit4 considered for M&A activity – seeing 52% of firms having acquired in the last five years. And despite the average integration being shorter than any other geography, at four months, 86% still said M&A was taking longer than expected.

Among the leading business challenges for UK respondents were personnel changes or redundancies, and inconsistencies with financial data. Conversely, even as companies executed lay offs to minimise the costs of an integration, they complained of the IT talent and resource allocation required to make their deals work.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}