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Analysis

Business services M&A update: Q4 2018

Investing in talent is not something new for those in the business services industry. In Q4 we saw talent investments happen across the spectrum, from outsourcing in the Philippines, new and improved ways to retain talent at professional services firms and even education technology companies investing in students by upping their online degree program game. This business services mergers and acquisitions 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

  • Out of home advertising flourishes as other traditional mediums struggle in the digital age1: As marketing agencies continue to shift their focus away from television, radio, magazine, and newspaper ads in favor of social media and other digital channels, billboards and other out of home advertising strategies have experienced a resurgence. Billboards comprise 66 percent of the out of home advertising market, with about 370 thousand active billboards in the US and an estimated 15 thousand annual additions. As venture backed startups and large corporations continue to see increasing value in out of home marketing strategies, advertising agencies will likely seek innovative methods to leverage modern technology in the billboard space.
  • Business process outsourcing growth in the Philippines2: As small- and medium-sized companies continue to transition to the cloud, demand for business process outsourcing services has grown significantly. Lloyd Ernst, CEO of the business process outsourcing company Cloudstaff, contends that enterprises are increasingly recognizing the opportunity to leverage untapped talent in the Philippines. Although a considerable amount of outsourced hiring has been focused on other regions, including Singapore and Hong Kong, it is estimated that 1.3 million people are currently employed by business process outsourcing companies in the Philippines. Ernst and other technology executives assert that the high level of English language proficiency and exposure to Western culture within Filipino communities streamlines training processes for the Pinoy population.
  • High attrition rates of junior staff within the consulting industry3: Many consultancies and other professional services firms are struggling to retain junior talent beyond the first few years of employment. With millennials being less likely to stick with an employer for a long period of time and comprising the majority of consultancy staff ranking below Senior Manager, high turnover rates may persist in the industry. Some professional services firms have implemented solutions aimed at driving higher retention of junior staff, such as Deloitte’s WorkAgility Programme which enables employees to take extended time off for travel. It is anticipated that consultancies will continue to look for innovative channels to connect with and cater to their junior staff.
  • Leveraging massive open online courses as an economical customer acquisition tool4: Many educational institutions and venture backed education technology companies, such as edX and FutureLearn, are integrating massive open online course (MOOC) platforms into their suite of offerings. While universities and education technology companies historically saw little value in the altruistic business model of MOOC platforms, between 25 and 30 MOOC based degrees were announced in 2018. This trend is likely signaling that universities believe MOOC platforms can serve as an inexpensive marketing tool that can lead to monetization of students that eventually choose to pursue a full-fledged degree program.

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References

1 Zachary Crockett, “The hottest advertising trend of 2018? Billboards.,” https://thehustle.co/billboard-advertising, accessed January 22, 2019.

2 Leah Callon Butler, “Where the Future of Crypto Payments Is Being Built,” https://www.coindesk.com/where-the-future-of-crypto-payments-is-being-built, accessed January 22, 2019.

3 Consultancy.uk, “How consulting leaders can tackle the retention problem of juniors,” https://www.consultancy.uk/news/19569/how-consulting-leaders-can-tackle-the-retention-problem-of-juniors, accessed January 22, 2019.

4 Dhawal Shah, “Reflecting on 2018, and (Tentatively) Projecting the Future,” https://www.insidehighered.com/digital-learning/article/2018/12/12/recapping-year-digital-learning, accessed January 22, 2019.

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