Whether you're planning to sell your business or have already embarked on that path, this research of 100 buyers of consulting firms, will influence your thinking and provide some important signposts as to how to best maximize the value of your consulting firm.

1. 1 Buyers Research:
Key Findings from acquirers of Consulting firms

2. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S2
1. Brief introduction to Equiteq
2. Buyers Research Report methodology
3. Key insights
– Insight 1: Buyer expectations over the next three years
– Insight 2: Buyers’ ideal characteristics of consulting firms
– Insight 3: Where buyers source deals
– Insight 4: Typical deal structure and earn-out periods
– Insight 5: Deal opportunity failure rates
4. Key messages and Conclusion
5. Questions & Answers
Agenda

3. Equiteq

4. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S4
Equiteq is a boutique M&A and strategic advisory firm
wholly focused on the consulting sector
Our experts provide added value to our clients
Equiteq is based inLondon, with hubs in New York and Singapore. We are run by world class
investment bankers, corporate finance experts and growth consultants in all three locations
• Community insights
• Deal documentation
• Buyer insight
• M&A research
• Unique IP

5. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S5
We deliver above market returns and attractive deal terms
Highlights and Statistics
• Financiallystableclients
• Wellpreparedforsale
• Gettinghighdemandfrombuyers
• Operationallyrobust
• Buyerbeliefinthefuture
• Compellingsynergycase
• Pricereflectsfuturenotpast
The Equity Value Model drives results
Sale
Profit
and value
growth
story
Yr –1 Yr +3Yr –2 Yr +2Yr –3 Yr +1
Past Future
PremiumvaluezoneAveragevaluezone
Price = x x xDiscounted
EBIT multiplier
1 Market
Premium
3Equiteq Risk
Factor eRF
2 Synergy
Premium
4
Equity
Growth
Wheel
Market
proposition
Intellectual
property
Sales
& profit
growth
Management
quality
Client
relationships
Consultant
loyalty
Quality
of fee
income
Sales &
marketing
process

6. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S6
(Brand/Media Consulting)
Acquired
Sonaa
Equiteq acted as lead advisor to 1HQ
on the transaction
2013
(FS Consulting)
Sold to
Cordium
Equiteq and Corbett Keeling
advised on sale prep and sale
2014
Equiteq is a global leader in consulting services M&A
8
(Management Consulting)
Sold to
Chime Communications plc
Equiteq and Corbett Keeling advised
on sale preparation and sale
2012
(Management Consulting)
Sold to
Baird Capital
Equiteq and Corbett Keeling advised
on sale preparation and sale
2013
(Management Consulting)
Initial Public Offering
Equiteq advised on equity growth and
IPO preparation
2012
(Oil and Gas Consulting)
Sold to
SLR
Equiteq advised on sale
preparation and sale
2014
(Technology Consulting)
Sold to
Sagentia Group
Equiteq advised on business strategy
and equity growth
2013
(Real Estate Advisory)
Sold to
Navigant
Equiteq advised on growth, sale prep
and partnered with 7 Mile on the sale
2012
(HR Consulting)
Sold to
Capita
Equiteq advised on growth, sale
preparation and sale
2013
(Technology Consulting)
Acquired
Hexarus
Equiteq advised Absoft on target
acquisitions
2012
(Management Consulting)
Sold to
FTI Consulting
Equiteq advised on sale preparation
and sale
2013
(Management Consulting)
Acquired
Polestar Group (USA)
Equiteq acted as lead advisor on the
transaction
2013
(Disputes Advisory)
Sold to
Parentebeard, USA
Equiteq and Paramax advised on sale
preparation and sale
2013
(Market Research Consulting)
Sold to
M-Brain
Equiteq advised on sale preparation
and sale
2014
(Int’n Development Consulting)
Sold to
AECOM
Equiteq advised on sale preparation
and sale
2014
(Property Consulting)
Sold to
EC Harris
Equiteq advised on sale preparation
and sale
2014
(Engineering Consulting)
Acquired
E3 Consult
Equiteq advised CDM on target
acquisitions
2011
(Management Consulting)
Sold to
Take Solutions
Equiteq advised on sale preparation
2011
(Management Consulting)
Sold to
Sovereign Capital
Equiteq and Corbett Keeling advised
IMS on sale
2010
(Management Consulting)
Sold to
BT plc
Equiteq advised on growth sale
preparation and sale
2008

7. Methodology

8. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S8
 M&A activity within professional services is very active
and growing
 There is little direct advice available on why and how
buyers of consulting firms behave
 We felt it was important to have a primary view from the
buyer perspective
 We commissioned the following independent research:
• Overall demand trend
• Types of consulting firms in demand
• Deal sourcing preferences
• Deal structures
• Reasons that buyers fail to close
Equiteq
The 2014 Buyers Research Report
2014 Buyers Research Report

9. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S9
Geographic profile of buyers surveyed Industry sectors of buyers surveyed
The buyers interviewed cover a wide range of
geographies and sectors within professional services

10. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S10
Level of buyer contacts surveyed Business type of buyers surveyed
The majority of those interviewed operate at a senior
level in the head office
The directors and senior managers interviewed are responsible for 310 acquisitions of
professional service firms in the past three years

11. Buyers’ expectations over the next three years

12. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S12
Source of growth over the next
two to three years
Are buyers seeing more or less
opportunities than in the last year?
Buyers see more opportunities for acquisitions, which
they have identified as a source of growth for their firm

13. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S13
• Buyers of professional service firms expect a 6%+ increase in deals over the
next 3 years
• Buyers anticipate acquiring an average of 3.3 professional service firms over
the next 2-3 years
• The average buyer acquisition budget is $65M
• $90M for prolific buyers (5% of prolific buyers cited a budget of $200M or more)
• $35M for regular buyers
• Buyers are looking to do more deals
• We are currently in a strong market for
sellers – a good time to be thinking
about an exit
• Sellers must be able to demonstrate
standalone value and synergy
Key
Findings
What this means for sellers
The acquisition appetite reflects favourably on sellers
“We absolutely want to accelerate our acquisitions
both in terms of size and numbers because we are
quite cash rich”
“Since the financial crisis, it’s become more
obvious who the good players are and they tend to
be a lot more expensive!”

14. Buyers’ ideal characteristics for consulting firms

15. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S15
Factors attracting buyers to a consulting firm Factors deterring buyers from acquiring
The only factor outside the seller’s control is cultural fit
with a buyer

16. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S16
• 50% buyers are very or extremely interest in acquiring a firm in the US.
• On average, buyers are interested in firms with revenue $15M to $40M
• Average size of ideal target
• Prolific buyers: $32M
• Regular buyers: $26M
• Think carefully about building core
services rather than diversifying into
different markets
• Clearly articulate your cultural identity -
consider the cultural fit between your firm
and potential buyers
• Revenue growth more important than
scale
Key
Findings
What this means for sellers
Ideal fit is a mix of financials, culture, and offerings
“Their values have to fit with our own otherwise we
would never make it work… ”
“The deal will fall away very quickly if there’s no
strategic fit”
“Growth is critical unless we felt it was something we
could turn around…but we wouldn’t want to divert our
own management’s time”

17. Where buyers source deals

18. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S18
Where prolific buyers source deals Where regular buyers source deals
Prolific buyers are more likely to source a deal through a
third party and internal M&A process

19. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S19
• It is not easy to get through the early
filtering rounds
• Even more difficult to initiate a
secondary approach to the same buyer
• It is important to understand each
buyer’s process
Key
Findings
Buyers have different approaches to sourcing deals.
It is important to tailor your strategy
What this means for sellers
• Prolific buyers source 42% of their acquisition opportunities via third parties
and 38% via their internal M&A team.
• Even buyers with M&A operations put the intermediary route as the most
effective source of deals
• Regular buyers tend to rely on their existing relationships with acquisition
targets as their best deal source
“Direct approaches are very, very rare. It almost
all comes from our own activity or from third
parties.”
“Intermediaries definitely help…they are a sort of
filtering process.”

20. Typical deal structures and earn-out periods

21. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S21
On what targets do buyers base earn-outs?
Gross Margin / Profit is the most common earn out metric
Proportion of earn-outs that hit target
Most buyers focus on revenue or gross
margin to drive growth
Earn-outs are typically structured to be
mostly achievable

22. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S22
What proportion of the total consideration is paid
up-front in cash?
On average, what earn-out period do
you operate?
Approx. 46% of total consideration is paid up-front in cash

23. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S23
• Over 90% of professional service M&A deals involve earn-outs or deferred
payments
• Earn-outs are typically based on growth in revenue/gross profit which are
easy to measure and controlled by seller
• Buyers are likely to pay between 41% - 60% up-front
• On average 74% of earn-outs hit their target
• Realistic expectations are key – very
unusual to receive 100% cash at close
• Buyers may use the amount of up-front
cash as a negotiating tool rather than
increasing the overall price
• It is important to understand the targets to
insure that the earn-out is achieved
Key
Findings
The majority of transactions include a 2-3 year earn-out
What this means for sellers
“The earn-out has to be long enough to integrate
them into the business but not so long that they are
demotivated…”
“If they are not hitting at least 80% of the earn-out,
something is probably going wrong. It has to be
largely achievable.”
“We never use staff retention as a target… it simply
doesn’t work in the long run.”

24. Deal opportunity failure rates

25. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S25
What percentage of the total qualified opportunities
that buyers look at get rejected before an NDA is signed?
What percentage of deals where there is a signed Letter of
Intent fail before completion of the due diligence process?
Buyers need to review a large number of opportunities in
order to successfully complete a transaction

26. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S26
First Hurdle
• Buyers reject a high proportion of opportunities
very early
• The challenge for sellers is to prepare early to
make a good first impression
Second Hurdle
• From NDA to Letter of Intent is another high-
attrition period
• This is where value and structure are agreed
Third Hurdle
• From LoI to completion of due diligence
• Involves the most stringent due diligence period
so any emergent issues can derail the deal
The three key stages of a transaction
Summary of fall-off at key stages

27. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S27
• On average, buyers look at 100 opportunities to close 1 deal
• That does not mean that 1% of companies successfully sell!
• It does, however, mean that rifle shot processes to one buyer are risky
• Following the Letter of Intent, it takes an average of 4.7 months to complete a typical
deal
• The use of intermediaries reduced the average duration by 1 month for prolific buyers
• Define who you are selling to and why your
proposition is likely to appeal to buyers
• Look at what you need to do at each stage
of the process and be realistic about the
time and effort required
• Preparation accelerates the process and
mitigates the risks
Key
Findings
Buyers need to review 100 opportunities to close 1 deal
“At any one time there are probably a couple of
hundred acquisitions we might be interested in but
only a tiny fraction get through the NDA.”
“We probably looked at 30-40 potential deals and
ended up with two Letters of Intent which have
now been completed”
What this means for sellers

28. Ways to increase odds of a successful transaction

29. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S29
1) Prepare your firm
• Mitigate known risks
• Demonstrate inherent value
2) Clarify your value to different buyers
• Strategic buyer vs. Financial buyer
3) Time the market
• Look for positive market indicators – both broadly and in your specialty areas
4) Cast the net wide
• Large number of buyers at beginning increase probability of offers at later stages
5) Keep your business growing through the M&A process
• Duration of sales process varies, keep the business growing and profitable
Five key strategies can significantly increase your
chances of a successful sale

30. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S30
• Overall a positive picture for sellers
o 6% expected growth in acquisitions over the next 2-3 years
• Buyers are specific about their acquisition criteria
o More than 50% are very or extremely interested in US professional service firms
o On average, looking for professional service firms with $15M - $40M in revenues
• Buyers are more likely to use intermediaries or their own M&A operations for deal
sourcing
• Most buyers will seek an earn-out structure
o Approximately half the value of the firm paid up front
o Earn-out period of 2-3 year
• Be realistic about expectation as you go to market
o Very few opportunities presented a buyer will get through the early stages
Conclusion

31. W W W. E Q U I T E Q . C O M / G R O W I N G & R E A L I Z I N G E Q U I T Y VA L U E I N C O N S U LT I N G F I R M S31
More resources available at www.equiteq.com