Are you scaling smart or scaling towards failure?
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You make decisions every day on the direction of your business, but while you work hard to scale your revenue, are you also scaling your equity value? Or could that value be eroding behind your back? With so many strategic decisions and opportunities available, choosing the best one and when to take them can be difficult. Equity value can be eroded very quickly, after which it takes a long time to build back up, so you want to be as prepared as possible to avoid wrong turns along the way. In these slides we share our knowledge on when and if you should be considering the following opportunities as part of your growth strategy: - New market entry - Leveraging IP - Inorganic growth - Diversification View these slides to find out our advice on assessing the risks and rewards of your options.
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Are you scaling smart or scaling towards failure?
- 1. Confidential© Equiteq 2016 equiteq.com Growing equity, realizing value Are you scaling smart or scaling toward failure?
- 2. Confidential© Equiteq 2016 equiteq.com Equiteq is the leading M&A firm focused exclusively on the consulting sector What we do for our clients Global presence and consulting industry credentials 2 Equity value realization Sale to a Strategic Buyer or Financial Investor Sell 50+ Deals Value creation and sale preparation Between 1 and 5 years ahead of a desired transaction Prepare 300+ Clients Why we’re different • Deep domain expertise in the Consulting sector • Add value and engage at any stage in the exit destination journey • Unique blend of consulting, corporate finance and investment banking skills NEW YORK LONDON SINGAPORE Established in 2004 Regular AMCF USA speaker 50 people across 4 continents Regular MCA UK speaker Clients in 27+ countries Widely published in industry media SYDNEY
- 3. Confidential© Equiteq 2016 equiteq.com Smart Scaling is ensuring business growth translates into equity value growth by avoiding mistakes and missteps
- 4. Confidential© Equiteq 2016 equiteq.com Contents of today’s webinar Running a growing consulting firm Which scaling option is right for my firm? Key Takeaways and Questions What buyers are looking for
- 5. Confidential© Equiteq 2016 equiteq.com A successful consultancy is a growing consultancy 5 Aim to grow What are you growing for? Dividends or Sale Consider what a buyer would think
- 6. Confidential© Equiteq 2016 equiteq.com What are buyers looking for? 6 Consistency and Pipeline01 Size02 Focus03 IP04
- 7. Confidential© Equiteq 2016 equiteq.com Consistency and Pipeline Consistent growth and a solid pipeline build confidence and reduce perceived risk for a buyer 7 PipelineConsistency - Revenue & Profit 2013 2014 2015 2016 2017 Revenue EBITDA How much work is ‘booked’? Time Significant proportion of booked work PipelineRevenue
- 8. Confidential© Equiteq 2016 equiteq.com Size Buyers will consider a wide range of sizes, but on average $30m is considered the optimum size 8 Source: Equiteq – The Global Consulting Mergers and Acquisitions Report 2016 Range of consulting deal values in 2015
- 9. Confidential© Equiteq 2016 equiteq.com Focus Generally buyers like focus in service, sector and geography to make synergy work 9 Service Focus Sector Focus Geographic Focus
- 10. Confidential© Equiteq 2016 equiteq.com IP Buyers want IP they can leverage 10 Revenue Generating Proprietary Methodologies Thought Leadership Benchmarking Data
- 11. Confidential© Equiteq 2016 equiteq.com What scaling option is right for my firm? 11 Entering a new market?01 Developing IP?02 Acquisition to drive growth?03 Diversify my offering?04
- 12. Confidential© Equiteq 2016 equiteq.com Entering a new market? Can be high cost (financial and effort), but also valuable in demonstrating scalability of model 12 Simple guide to focusing your sales efforts Current Clients Past Clients New Clients Focus of Sales Efforts High ←→ Low Understanding of Client Needs High ←→ Low Strength of Message Stronger ←→ Weaker Difficulty of Sale Easier ←→ Difficult Entering a new Industry Sector Entering a new Geographic Market New Markets
- 13. Confidential© Equiteq 2016 equiteq.com Drives Strategy Intellectual Property Leverage Developing IP? Leverageable IP aligned to your strategy is most valuable 13 Benchmarking Data Revenue Generating Proprietary Methodologies Thought Leadership Drives Resource Leverage Model
- 14. Confidential© Equiteq 2016 equiteq.com Acquisition to drive growth? Acquisition is a significant undertaking, you must be clear about the benefits and risks 14 Time Revenue Time Revenue Your Firm Target Firm Time Revenue Your Firm + Target Firm ? ? ? ?
- 15. Confidential© Equiteq 2016 equiteq.com Diversify my offering? Wider propositions can bring additional client fees, but beware of diluting your focus 15 Services Focus No. of Services Focus / Expertise / Credibility
- 16. Confidential© Equiteq 2016 equiteq.com Key Takeaways 16 Smart Scaling You can grow revenue and profits, and equity value You need to consider how a buyer will view your firm, when making decisions today that will affect your future Buyers like: Firms with critical mass Consistent performance Focused propositions, sectors and geographies Leverageable Intellectual Property
- 17. Confidential© Equiteq 2016 equiteq.com More resources 17 A free source of information, advice and insight to help you prepare and sell your consulting firm Join at equiteq.com/equiteq-edge
- 18. Confidential© Equiteq 2016 equiteq.com
Editor's Notes
- Bruce’s standard Equiteq blurb
- Equity and growth – do both Buyers like xyz, consider in your decisions.
- Today we will cover: Growth = success What buyers look for & your decisions Q&A
- Growth = success Opposite = stagnate and decline Growth results in good outcomes What is your aim? Dividends or Sale? Don’t have to decide yet Sale ready business vs. bad decisions Can keep options open by understanding buyer’s needs (scaling smart)
- What do buyers look for? We talk to buyers and produce Buyers Report 4 Key areas they look for Trade buyer vs financial investor
- Buyers want Confidence Consistency is y-o-y growth in revenue and profits – they don’t expect magic Pipeline also builds confidence
- Any firm can be sold Small end unlikely to get premium price Mega deals happen, but few of them Good deals in the middle, $20m is optimum Affected by circumstances, but generally most firms would benefit from more scale
- Focus is easier for buyers to deal with Service Sector Geography Bruce’s story of Netherlands and Spanish firm, harder to find buyers
- IP in broad sense All about leverage, ability to scale E.g. Accenture Also reduces risk Types of IP buyers value
- How does that affect me? No right or wrong answer, 4 options to look at
- No right or wrong [repetitive?] Geographic market and industry market Greenfield market is a draw, but difficult, easier to sell to people you already know Exhausted your current market? Don’t underestimate the difficulty, may expand too early (especially to geographies) Significant financial costs, significant time cost (seen many fail), complication cost of operations New industry sector costs are slightly better but still significant. Management distraction can be the biggest cost. Not saying ‘never’, we can help you with how to do it Buyers view on geographic dispersion – less attractive if small and requires wider buy-in from the buyer Potentially very valuable because demonstrates scalability of your model
- IP – deliver more with less, leverage Focus on the right IP – aligned to market and client needs, senior responsibility IP is value – faster on-boarding, profits, leverage, scalability. Only question is where to focus IP is beneficial to you and to the buyer
- Acquisition is seductive, but have you thought of these strategic/synergy questions? What about capability and capacity to do the deal? Integration also takes time, and you likely can’t sell yourself for 2 years Don’t want to sound negative, acquisition can be great but needs careful consideration
- More services to sell is helpful, more revenue, longer clients, re-engage clients E.g. recent client, [new analogy needed, see script] Diversifying, but still quite focused. Easier to integrate, doesn’t need multiple signoffs, don’t make it difficult by adding red flags for a buyer Other considerations, margins, resources. But try not to raise eyebrows, want to be easy for buyer to understand.