Industries – Services

SERVICES

In addition to digitalization, network-based providers of professional services in particular are important drivers of developments in the service sector. The M&A partnership Globalscope enables IFBC to support its clients in the worldwide search for suitable target companies and interested buyers in order to support service companies in developing their business model accordingly.

YOUR CONTACT PERSON

Fabian Forrer, CFA
Director
fabian.forrer@ifbc.ch

CURRENT TOPICS & CHALLENGES

Freelance Employees Causing Disruption

Freelancers and network-based employees are disrupting traditional professional service subsectors. With their specialized knowledge and their network, they can tailor their services even better to the needs of the customers.

Political Headwinds Subsiding

2016 was the year of political upsets. Trump is now well into his presidency, and whilst Brexit is still fraught with uncertainty, it is largely „business as usual“ for UK companies operating within the EU.

Robotics Shaping the Future of Logistics

UPS, DHL and FedEx are all experimenting with robotic loading and unloading of irregular parcels. Improved mapping technologies will allow robots to evaluate packets more accurately, as well as increasing efficient use of space in shipping containers and lorries.

Digital Driving New Business Models

Management consultancies are looking to reduce their overreliance on senior consultants by applying more quantitative analysis. Additionally, they are using automation to decrease lead times and increase efficiency.

Small consulting companies use niches

Whilst the consulting sector is still traditionally dominated by large firms, inclusive of the Big 4, smaller challengers are gaining momentum by focusing solely on a niche and offering a highly specialized service.

Consolidation Across the Consulting Market

More mature, mid-size, companies are being snapped up by major players in a bid to provide a full suite of services.

NOTABLE RECENT TRANSACTIONS

Gartner Acquires CEB

Information technology research and advisory company Gartner, Inc. has acquired US best practice and talent management company CEB for approximately $2.6bn.

GoGoVan and 58 Suyun Merge

The merger between GoGoVan and 58 Suyun has created the largest online intra-city logistics platform in Asia. The combined company is worth in excess of $1bn.

General Electric Competes Penske Equity Sale

GE has sold its final 15.5% stake in Penske Truck Leasing to the former partners of the business for around $674m. Penske manages a fleet of around 250‘000 trucks across America.

M&A TRENDS AND MARKET ANALYSIS

The following data have been compiled by Globalscope for the service sector. Valuation trends for the past five years were analysed. The following graphs show average half-yearly transaction data, comparisons of individual sub-segments and data from listed companies as of mid-August 2017. The Total Market comprises companies and transactions in excess of USD 5 million. The Lower-Mid Market segment comprises companies and transactions in the range of USD 5 million to USD 150 million.

EEV/EBITDA multiples of M&A transactions over time

All Transactions
Lower-Mid Market

  • Compared to the average EV/EBITDA multiple over the last six years of the total market of around 12.1x, the average multiple in the lower-mid market is significantly lower (around 8.0x).
  • In 2017, the increase in the multiple of the total market to 13.9x was mainly driven by larger transactions. In the lower-mid market, the average EV/EBITDA multiple fell to 7.8x.

EV/EBITDA multiples of listed service companies by region

All Campanies
Lower-Mid Market

  • In Europe, the average EV/EBITDA multiple of listed service companies is around 13.4x.
  • The total market average multiple is higher in Asia/Pacific only.
  • Except for Americas, the average EV/EBITDA multiple of the lower-mid market is lower than the total market average EV/EBITDA multiple.

EV/EBITDA multiples of listed service companies by subsectors

All Campanies
Lower-Mid Market

  • The highest average multiple in the service sector can be observed in research and consulting. With an average multiple of 16.0x, the multiple in this subsector was around 70% higher than in the transport subsector.
  • In the lower-mid market, the range of average multiples between the individual subsectors is smaller than the correspondent range in the total market.