Selling a consultancy business

As we’ve covered in recent insights on professional services and the environmental and sustainability sectors, consultancy businesses are driving a significant amount of M&A activity across numerous UK industries.

The raft of challenges that businesses face, ranging from implementing ESG policies, navigating global geopolitical uncertainty and economic upheaval, and adapting to widespread changes within their industries, have led to consultancy services being in increasingly high demand.

The quest for strategic change revolves around market demand, technical feasibility and economic viability. Data/analytics, AI and engineering advances are impacting upon these areas in a way that requires consultants to play a new technical-expert role.

Consultancy firms, especially in “mission critical” niches such as technical, financial and environmental consulting, have become highly sought-after acquisition targets, generating high multiples and attracting investment from private equity firms eager to capitalise on their growth.

For many ‘exit-ready’ consultancy owners, now is certainly as good a time as any to explore strategic options, including a trade sale, or a partial sale to an investor such as a private equity firm.

While consulting has been somewhat more resilient in the face of the UK’s economic issues than many other sectors, exit-ready owners planning a sale should still look to move sooner rather than later in order to lock in value, especially given the near-certainty of a general election this year and the possibility of a less forgiving tax environment for vendors in M&A transactions.

As well as taking advantage of a high-demand environment, many consulting firms also require additional investment to strengthen their businesses, build scale through acquisitions and to tap into emerging technologies such as AI. Failure to do so could see them left behind by their rivals and potentially at risk if market conditions change for the worse.

However, selling a consulting business can be a highly complex process that owners should approach methodically in order to maximise their valuation. Similarly, for owners not looking to exit their business completely, but still need a partial cash-out or want an injection of capital to fund the next phase of growth, securing the right kind of investment (investment that can finance growth while not sacrificing the company’s brand, ethos, values etc) can be a delicate balancing act.

This latter point is particularly salient given the often insular nature of the wider professional services industry, in which employees traditionally seek to work their way up to equity partner level. Private equity investment, however, can lead to a loss of control over the company’s strategic direction. As private equity interest in professional services continues to grow and more consultancies consider the benefits of external financing, this potential tension could be a key consideration.

Consultancy valuations and M&A activity
In many other sectors, M&A and valuations have been on a sharp downward trajectory over the past two years or so - an issue that has been particularly pronounced in the UK. Consulting, however, is one sector that has seemingly bucked this trend. A recent report from Boxington found that consulting sector valuations “outperformed most share indices despite global economic headwinds.”

The sector’s strong fundamentals – particularly apparent during hard times – were seen as being key in this regard, with the report citing strategic and digital transformation, AI adoption, restructuring, sustainability-related goals and acquisition strategies as important drivers of resilient valuations.

The report also demonstrated the strong trend for strategic M&A within the consulting sector, as industry incumbents utilised acquisitions to strengthen their existing market presence and expand into adjacent and new sectors or new geographies. According to Boxington, strategic buyers accounted for 42 per cent of consulting M&A activity during 2023.

The report split strategic acquisitions into four key types: consolidation acquisitions, in which buyers targeted firms in the same sectors and geographies in which they traditionally operate (e.g. KPMG’s acquisition of Think180, or, at the lower end of the market RAM Consulting’s acquisition of Pacific Safety Consulting); strategic acquisitions that involved a buyer diversifying geographically (US group Kearney’s acquisition of UK firm MSE) or by sector (digital change management consultant Palladium Group’s takeover of strategy and commercial consulting firm White Space Strategy); and super-strategic acquisitions, in which buyers expanded both in terms of sector and geography (UK-based innovation consultancy PA Consulting’s takeover of Chicago-headquartered boutique strategy consulting firm The Cambridge Group).

Reflecting the strong interest that private equity firms are taking in the consulting sector, 38 per cent of acquisitions were made by private equity-backed buyers, while the remaining 20 per cent were acquisitions made directly by private equity buyers.

Demonstrating the strong, fundamental responsiveness the sector has in times of global uncertainty and crisis, Boxington classified 78 per cent of acquisitions as involving target companies that fell under the traditional, multi-faceted “services” delivery model of consultancy. Despite the growing importance of technology such as AI and cloud computing, these traditional services were far more popular among buyers than tech-enabled services (16 per cent of deals) or software-as-a-service (SaaS) models (6 per cent).

A separate report from FirstPageSage analysing sale multiples for private consulting firms across a number of sectors also demonstrated significant strength. The report found that firms generating $5m-$10m in EBITDA across all the sectors analysed generated EBITDA multiples between 12.6x and 14.2x.

Looking at data from recent years, the report found that EBITDA valuations have fluctuated significantly as a result of factors such as COVID-19 and the global economic downturn. Despite erratic valuations, multiples were strong even at their lowest, with EBITDA multiples ranging from 9.7x - 15.2x from 2020 to 2023.

Like much of the professional services industry, the UK consulting sector is largely comprised of mid-sized firms and, in this regard, both the Boxington and FirstPageSage reports had good news for UK consultancy owners potentially eyeing the exit door during 2024.

According to FirstPageSage, mid-sized financial consultancies have seen the highest EBITDA multiple growth over the past year, with multiples ranging from 13x – 15x, up 14 per cent from 2022. Meanwhile, the Boxington report found that, despite its far smaller geographic scale in comparison to markets such as Asia and the USA, the UK and Ireland accounted for 20 per cent of M&A activity across the entire consulting sector during 2023.

Preparing a consultancy business for sale
Despite the strong valuations and resilient M&A market the consulting sector has seen, owners looking to sell may still have to contend with a broader dealmaking environment in which valuations are low and buyers less willing to pay a premium even for top-quality businesses.

For that reason, owners considering an exit should look at ways of making their business even more attractive to potential buyers and increase its value prior to a sale. This process will involve both general steps taken to prepare a business for sale, scale up prior to a sale and increase its attractiveness to buyers, as well as consideration of factors more specific to the consulting industry.

Predictable, diversified revenue
One of the first things potential buyers will look for is revenue and profitability. As we discussed in our piece on scaling up your business, successful businesses are often distinguished by predictable, resilient revenue models. Companies should seek to establish strong sales and marketing teams to find and deliver new revenue sources and harness technologies such as CRM tools and digital billing to ensure smooth customer service and strong client relations.

Given the multifaceted nature of the consulting industry, consulting firms planning a sale should seek to establish strong, diversified revenue streams. Repeat sales and an established client base are key, but so is the ability to point to growing sales and revenue from a range of sources.

Of course, the more scaled-up a consulting firm is, the stronger its earnings are and the more diversified its revenue sources, the higher its valuation is going to be. This is a process that could take many years, but for those businesses targeting a quicker sale, they will need to already be exit-ready, and will be able to demonstrate solid, growing revenue stream that is resilient and not overly-reliant on one source.

A strong reputation
Despite being highly-fragmented, professional services industries tend to be quite tightly knit, even if that is just on a regional level for small firms in one specific area. Nonetheless, having a strong reputation within the industry – as well as among clients and customers – is crucial to commanding a high valuation.

When scaling up, consulting businesses should ensure that they are not sacrificing the service they provide to their existing customers in their pursuit of new ones. A growth strategy should always be balanced with efforts to improve operational efficiency and bolster the lines of service that existing customers benefit from in order to ensure an established, satisfied client base and strong client retention.

One asset that can make a consulting firm significantly more attractive is underlying long-term stability, something that can be attained by providing excellent service to customers and being able to sign them up to long-term contracts.

This will result in a resilient, stable business, with a predictable revenue base, a stellar reputation among customers and other consulting firms and, ultimately, a company that is far more attractive to potential buyers and can command a higher valuation.

A specialised offering
Another important factor to bear in mind when growing a consulting business pre-sale, especially when diversifying revenue streams, is not to dilute the company’s offering. As demonstrated by Boxington’s M&A analysis for 2023, solidifying core offerings was just as vital for many buyers in the consulting industry as diversifying into new areas or regions.

A key consideration for buyers will often be finding a consulting business that offers a unique skill set and is the best in class in a particular niche. In fact, a good place to start when diversifying a consulting business is looking at how it can distinguish itself within its existing market, such as by incorporating adjacent services into its core offering to provide a more bespoke, comprehensive service or by harnessing the latest technologies that are emerging in their subsector.

Growth potential and scalability
Of course, as well as strong foundations, underlying stability and scaled-up revenue, something else that will be vital to buyers looking at the consulting market will be companies that also have significant growth potential and market opportunities.

As with any professional services company, consulting firms should always be looking at how they can position themselves to best respond to the changing, growing demands of the businesses that they serve and provide a service that continues to exceed client needs.

In order to do that, businesses need to be clear about the opportunities that are available to them (either in their core service area, an adjacent area or a new area altogether) in order to demonstrate clear opportunities for possible growth to potential buyers.

Crucial to this will be a keen awareness of the market, as well as overriding factors shaping the business’ service area (for example, incoming environmental regulations, emerging geopolitical threats and economic headwinds), and ideas on how the business can respond to these in order to serve clients more responsively.

This will be especially vital for owners in areas of consulting that have not proved as resilient over recent years. The FirstPageSage report on consulting company valuations showed that businesses in sub-sectors such as advertising and marketing consultancy have been more impacted by COVID-19 and the recent economic downturn and seen greater fluctuations in EBITDA multiples. For companies in sectors that have been significantly impacted by recent headwinds, being able to demonstrate avenues through which the business can improve its resilience to external factors and become more responsive to crises could be crucial to securing a good valuation at sale.

Owners should also consider how they can begin to move into adjacent areas and provide new services, which can offer buyers ready-made routes to quick expansion post-acquisition. While buyers will likely have their own growth ideas, providing the possibility for buyers to acquire a business that is already in growth mode and has pre-existing plans for expansion ready to be acted upon could make it more attractive and potentially lead to a higher valuation.

The company may have scaled up pre-sale, but buyers will also want to see that this trajectory can continue. Is the business well-placed to continue growing its revenue streams? Is it in a position to undertake significant hiring or geographic expansion? Can the client base and revenue streams be solidified and diversified further? If the business is not able to demonstrate headroom for further growth, then buyers may not be interested and efforts to scale up prior to the sale may have been in vain.

Assets: Talent, IP and brand
Finally, any business looking to improve its valuation should be looking to secure and increase the value of its assets, whether tangible or intangible. For consulting businesses, the most valuable asset is likely to be their employees. A talented, experienced team that knows its client base, knows how to work well together and is experienced at attracting new clients is an invaluable asset to a consulting company.

A sale process can be disruptive to any company, so consulting businesses should seek to ensure that preparing for a sale doesn’t cause an employee exodus. Owners should make sure that key employees are kept in the loop throughout the process and given assurances that there won’t be significant disruption during the sale and, if possible, afterwards.

Persuading employees that remaining with the company is their best option may mean considerable expenditure in terms of salary increases and new bonuses, but being able to offer potential buyers an experienced, satisfied, successful team that knows the company, knows the clients and is primed to help drive future growth will be invaluable in improving the company’s valuation.

Other than employees, perhaps the most valuable asset for a consulting business is its intellectual property, brand and proprietary assets. These are the things that mark a consulting business out as a reputable leader in its sector, provide a competitive advantage and foundation for future growth. Securing copyrights, patents or trademarks on the company’s brand and other assets will help to significantly boost its valuation. Nevertheless, part of the value of the ‘brand’ is linked back to the quality and cohesiveness of the company’s people and the culture that results.


Case study: EntryPoint Consulting sale to KPMG
EntryPoint Consulting LLC is a firm that providing SAP software implementation services to a wide range of companies, with 85 per cent of its business related to import and export software implementation strategies and services.

In 2014, the company’s co-founder and sole shareholder Pete Martin sold the business to Big Four advisory firm to KPMG for 12x EBITDA, in a deal that featured a significant upfront cash payment, no earnout agreements and enabled him to make a full exit.

To put this into perspective, around that time, deals for professional services consultancies of a similar size were typically around 6-7x EBITDA (with a higher end of 9x EBITDA) and even many of these deals featured low initial considerations, significant earnouts over long post-deal periods and involved the owner/owners remaining with the business post-sale.

EntryPoint’s sale, on the other hand, involved 70 per cent as an upfront cash consideration, 10 per cent that was held back for a three month period while EntryPoint’s clients were signed over to KPMG, 10 per cent contingent on the company’s key figures (“Rainmakers”, as Martin calls them) remaining with the business post-acquisition and a 10 per cent indemnification holdback to protect KPMG from potential litigation during the first year post-sale.

So, how did Martin achieve such favourable deal terms? The story is a perfect example of how to prepare a consulting business for a profitable sale, how to negotiate favourable deal terms with a potential buyer and how to develop your business to the point where you can make a full exit through a sale.

Speaking to the Built to Sell podcast, Martin revealed that he had ultimately decided to sell the business as he’d become, in his own words, “bored”. Prior to setting up EntryPoint, Martin had started and sold three smaller businesses. While he didn’t characterise these previous exits as failures, he describes them as a “school of hard knocks” that taught him valuable lessons: have the leadership team step up so you can exit fully; develop recurring revenue streams; build a loyal customer base; and make your exit at a time when the business is growing and has upward profitability.

Prior to beginning the exit process, EntryPoint’s leadership team had successfully been developed to the point where it could lead the business, opening up an opportunity for Martin to step back and target another venture.

This was achieved through a combination of professional development – with Martin training consultants to be better in sales cycles, meaning that he no longer needed to insert himself into deals – and back-end process documentation – with the company creating templates based on its pre-existing contracts, proposals and statements of work, providing a framework that was flexible for different clients, but consistent across the business.

When it came to recurring revenue, the company had moved in this direction around 18 months prior to the sale process beginning, with the development of sanction party screening (a service to help businesses avoid unwittingly shipping products to customers sanctioned by the US government). This gave the company valuable intellectual property and it used the service as a ramp offering – upselling customers more services once they had bought sanction party screening. Ultimately, the success of this meant that 30 per cent of the business’ revenue was recurring.

Martin, a former IBM Executive and SAP VP of Sales, is a well-known figure in the professional services world and had connections at KPMG. When he was considering a sale, he made contact with several professional services firms over potential partnerships, to gauge their interest in potentially acquiring EntryPoint.

“KPMG bit”, he explained, and after the companies did several deals together, expressed an interest in acquiring the business. After the initial stages, however, the deal stalled. Martin ultimately found out that KPMG was uncertain about acquiring EntryPoint without him remaining with the business following the deal.

Martin met with KPMG and successfully demonstrated to them that he didn’t need to be part of the deal, saying that he was entrepreneurially-minded (and therefore wouldn’t make a good employee) and that all of EntryPoint’s client relationships were held by the rest of the team, not him. The deal was agreed 30 days later.

When it came to agreeing upon a valuation, Martin said that he succeeded in “shaping the story”, selling his business plan to KPMG and convincing them of the revenue potential that EntryPoint could deliver. He conceded that the scale of KPMG in comparison to EntryPoint was also an important factor, with the difference between 9x and 12x EntryPoint’s earnings little more than a “rounding error” to a company of KPMG’s scale.

Martin’s starting point in negotiations over the price was 2x the company’s revenue, a figure he estimated to be around 25x EBITDA. Perhaps naturally, this wasn’t a figure that KPMG would agree to straight away, but, before getting into offers and counter-offers, Martin insisted that they thrash out the deal terms – and issued a clear message to other owners that they should never allow the terms of the deals to be separated from the price.

While KPMG initially wanted a low EBITDA multiple, earnouts paid over time and for Martin to remain with the business, the level of trust between the two parties meant that they agreed to work through the terms of the deal and the due diligence process before settling on a figure. As a result, after the terms were agreed and due diligence successfully completed, Martin was ultimately able to secure a full exit, with a 12x EBITDA valuation and no earnout.

Private equity investment – Should consultancies embrace external funding?
The Boxington study demonstrated that the majority of acquirers within the consulting sector are still strategic buyers – which is to say, most deals involved professional services or consulting firms acquiring other consulting firms.

However, not far behind were strategic buyers backed by private equity firms. This illustrates two things: the need for many buyers in the consultancy sector to gain external backing in order to act on their acquisitive growth plans; and the growing interest that private equity firms are taking in the sector.

Crucially, private equity buyers are being drawn to consulting firms operating in areas that are seemingly immune from the wider economic downturn due to the fact that the services they offer are deemed as essential by their customers. For example, financial consultancies and environmental consultancies have each remained in high demand and continued to attract strong multiples as companies seek to become more financially resilient and profitable or look to work towards their ESG goals in order to remain compliant with new and incoming regulations.

Ken Wotton, manager of Strategic Equity Capital at Gresham House, commented: “Niche business consultancies have flourished in the last few years, as investors have sought out capital-light industries offering lower risk and attractive growth prospects.”


Contollo Group is a newly-formed consultancy group working in the built environment sector. The Knutsford-based company seeks to serve clients across numerous sectors as they work towards their regulatory and sustainability goals in the built environment.

With ESG agendas and Net Zero goals increasingly important to businesses in many sectors, Contollo is seeking to grow rapidly through acquisitions in order to meet this demand and establish itself as a national professional services platform.

The company’s acquisitive growth strategy was boosted last month when it secured investment from private equity firm NorthEdge and completed its first acquisition with a deal for Manchester cost management consultancy Abacus.

Executive Chair Oliver Dennis commented: "Alongside completing our first acquisition, we are delighted to be partnering with NorthEdge to support us both financially and strategically on this journey. I am confident that our combined experience will enable us to build a leading UK professional services consultancy that improves sustainable outcomes in the built environment."

NorthEdge director Liam May said that the investment in Contollo represented several of NorthEdge’s focus areas, adding that Contollo was an example “of a regionally-based company with national reach”.

He continued that NorthEdge’s “Business Services sector team have been tracking the built environment for a number of years; the investment strategy is highly aligned with our ESG and sustainability commitments; and Contollo represents another buy and build investment in our portfolio following the successful completion of a number of bolt-on acquisitions to accelerate growth across the portfolio over the last decade."

According to Investors’ Chronicle, specialist consultancies accounted for 40 per cent of mid-market private equity volume in 2022, while, as per Boxington’s report, 58 per cent of consulting M&A in 2023 involved a private equity firm either as a buyer or backer for a strategic buyer. This trend could be set to intensify further if improving economic conditions lead to PE firms deploying their funds more freely.

The possibility for private equity interest in professional services industries to increase further was recently discussed by Mayer Brown’s Head of Private Equity Perry Yam, who said: “There is undoubtedly a growing interest in the sector among PE firms, particularly for smaller companies that can be aggregated.”

On the face of it, gaining private equity investment might seem to be a significant boon for boutique consulting firms, providing them with greater financial resilience, as well as the firepower to move forward with growth strategies by investing in acquisitions of their own or in new technologies such as AI.

However, it is not as straightforward as that. For any company welcoming in private equity funding, the investment brings with it the possibility of a loss of control and a potential change in the company’s strategic direction.

The partner model that many professional services businesses operate under is often seen as being vital to company’s generating steady, sustainable growth. It enables employees to work their way up to take a leading role in the company and a say in strategic decision-making. However, if private equity firms take over a share of the company, then there may be fewer routes for employees lower down the company to achieve this level of partnership, potentially disincentivizing workers and putting off potential talent from joining the company.

There are also fears that private equity firms could have a significant impact on how consulting companies operate. Private equity firms are typically looking to cash in on their investments within about five years and a recent article in The Times cited fears among some consultancies that inviting in private equity could result in the onus shifting to short-term growth ahead of a profitable sale a few years down the line. As The Times reported, this has led to fears that companies could take fewer safeguards in their pursuit of growth, for example when it comes to conflicts of interest that might arise when pursuing new work.

Another issue that consulting firms have raised regarding private equity is whether such a takeover actually does represent good value for the business. While it will often result in a deluge of funding, PE takeovers often load debt onto the company’s balance sheet, which can lead to a company spending significant amounts paying off debt, potentially constraining growth, investment and the ability for the firm to hire the best talent available.

Despite these concerns, it seems clear that private equity interest in professional services firms – and, especially, consultancies in niche areas – is significant and will be tempting to many consulting firms seeking to invest, expand their services and make acquisitions.

This means that owners could face difficult decisions when it comes to how they plan to execute their growth strategies. The organic growth route may provide greater stability, but will undoubtedly lead to the timelines for meeting growth aims being extended. Opting for private equity investment, on the other hand, will result in significant investment being made in the company’s growth, speeding up the process, but potentially changing its strategic direction, leading to some loss of control at senior level and maybe even sowing discontent among workers if not handled sensitively.

This could also be an issue for smaller consultancies exploring a trade sale to a strategic buyer, with many of the major acquirers in the consulting space being large firms or consolidators. Boutique consultancies may be longstanding businesses, with an established team that has forged strong relationships with customers. Even if such a business sells to another consulting firm, there is the potential that the new owner will consider strategic or operational changes that could disrupt the business.

Alternative exits: MBOs and EOTs growing in popularity
For some owners, exiting their consulting business may not be motivated by securing a high-value sale. Naturally, this will be a consideration in any exit, but for some owners who have built their businesses up from scratch and have a longstanding, loyal workforce, a crucial factor may be ensuring that the company retains its identity post-sale.

Selling to a trade buyer or private equity firm may put this at risk, with such a buyer likely to bring in their own set of entirely new strategic objectives. In this scenario, owners may be more tempted to target an alternative exit strategy, such as a management buyout (MBO) or sale to an employee ownership trust (EOT).

While such a sale may deliver less overall value and will almost certainly involve a far lower upfront consideration (meaning there is considerable risk if the business’ performance suffers post-sale), it is more likely to deliver a sense of continuity for the business, protect jobs, preserve the brand and identity and ensure that customers and clients continue to receive the same level of service.

MBOs and EOT sales have become increasingly popular over recent years, as outgoing owners seek to pass their businesses on to people they are familiar with and avoid the possibility of the company undergoing wholesale changes post-exit.


This has also been seen in the consulting sector, for example with the recent MBO of Suffolk-based risk management and training consultancy Praxis42. The deal saw founders Keith Paxman and Mike Stevens, who set up the business more than 20 years ago, sell the company to the management team, comprised of CEO Julian Roberts, Digital Managing Director Tom Paxman, Commercial Director Shane McAllister and Consulting Managing Director Adam Clarke.

Following the MBO, Keith Paxman said he “couldn’t dream of this sort of exit” when the company was first founded, illustrating the growing legitimacy of MBOs as an exit strategy. The deal also showed how MBOs can be used by consulting firms to move into new phases of growth, with the exit of the founders enabling the incoming management team to begin the next stage of the company’s development strategy.

Forward Corporate Finance acted as lead advisors to the management team and were able to secure backing for the MBO from Triple Point. Tom Paxman said that the Forward team “ran an extremely impressive process to attract the right funding partner in Triple Point, kept us all on track through a few bumps in the road and got the deal done we have had in the pipeline for some time now."

Forward Corporate Finance Manager Will Neill added: "The management team had been effectively running the business for some time now, and the founders plus management just needed some guidance and hand holding through the MBO process."


Despite the headaches that consulting business owners could face when considering a sale, exit or investment, there are a wide enough range of options available that owners should be able to find a strategy that works for them or their business.

For owners seeking to remain with their business and simply gain the financial backing to enter a new phase of growth (in what is a highly favourable environment for many consulting companies), private equity investment may offer the best route to growth. For those seeking to reap the rewards of their hard work and make a profitable exit, a sale to a private equity firm or larger industry counterpart could be the most appropriate. While, for business owners prioritising an exit that preserves the company’s brand, ethos and workforce, an MBO or EOT sale can enable them to pass the business on to the next generation of leaders.

For a frank, no-obligation discussion about your exit options with one of our M&A team, please drop your name and number here.

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