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Analysis

Business services M&A update: Q2 2018

As emerging technologies continue to change the business services landscape, many organizations are taking advantage of and utilizing new and improved data collection processes to better their businesses. From analysis of lifetime value and workflows to tech impacts on consulting services, business Services are taking on new challenges. This business services mergers and acquisitions (M&A) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the business services industry.

Business services trends

  • Driving customer lifetime value through strategic B2B marketing1: Key players within the business-to-business (B2B) advertising and marketing space have heightened their focus on improving customer lifetime value (CLV) in order to reduce attrition rates. Increased utilization of data analysis has enabled marketers to identify actionable patterns that can have a profound effect on businesses’ brand loyalty. These patterns can be used to implement a calculated diversification of consumer engagement, between email, telephonic, and social media marketing. Although useful data analysis can be difficult to implement, many organizations believe it is their best chance at increasing CLV. The interconnected relationship of CLV, consumer engagement, and data analysis will continue to be a crucial area of focus for B2B marketers in 2018.
  • Business process outsourcing (BPO) in the digital age2: Many players within the BPO space are heavily investing in tech-enabled applications and process enhancement technologies to streamline workflows and increase efficiencies. At the onset, many believed that the as-a-service software business model would entirely replace traditional sourcing services. Instead of as-a-service taking over, the market has grown as a whole. Q2 2018 figures have compelled ISG to take a more bullish stance on the traditional sourcing space, as they have raised the 2018 forecast to 4.4 percent growth. This forecast is a reflection of industry-wide confidence to embrace technological advances.
  • Consulting firms forced to innovate to remain competitive in the digital world3: The consultancy space is undergoing a major upheaval as participants are challenged to meet the ever-growing technological needs of their clients. Commoditization of technical acuity within the consulting industry is increasing the value of highly comprehensive services. These technology trends are forcing consulting firms to adapt and become intensive all-around service firms. The heightened demand for more sophisticated and fully-integrated service offerings from advisory companies is driving premium valuations and consolidation within the sector.
  • Legacy private equity behemoths establish social impact investment vehicles4: Leading alternative investment management companies are increasingly recognizing the investor demand and yield potential for social impact investing. Just in the past two years, both TPG and KKR have pioneered funds dedicated to investing in and profiting from companies with societal and environmental benefits. Tech-enabled companies that meet these needs may have a competitive advantage in the battle for capital, and both investment vehicles include a sector focus on education services. The proliferation of investment theses focused on education services is expected to spark highly visible M&A activity in the industry through 2018 and beyond.

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References

1 Mike Mothner, “Four B2B marketing trends In 2018,” https://www.business2community.com/b2b-marketing/4-b2b-marketingtrends-in-2018-02091176, accessed July 10, 2018.

2 The Data Center Journal, “ISG Index: Global outsourcing continues to accelerate, up 31 percent in 2Q18m,” http://www.datacenterjournal.com/isg-index-global-outsourcing-continues-accelerate-31-2q18, accessed July 10, 2018.

3 Consultancy UK, “Trends and challenges in the management consulting industry,” https://www.consultancy.uk/news/13111/trends-and-challenges-in-the-management-consulting-industry, accessed July 9, 2018.

4 David French and Joshua Franklin, “KKR launches unit focused on impact investing,” http://uk.businessinsider.com/r-exclusive-kkr-launches-unit-focused-on-impact-investing---sources-2018-4?IR=T, accessed July 11, 2018.

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