Wood Mackenzie: from £25m buy-out to £1.85bn acquisition target
Published March 2015
The recent run of acquisitions in the oil & gas consultancy market place has been boosted by the £1.85 billion acquisition of leading energy consultancy Wood Mackenzie by Verisk Analytics, a Nasdaq-listed data analytics provider. Energy consultancies are in demand following the sharp fall in the oil price which has led many oil & gas producers to cut back spending on big projects and turn to specialist consultancies capable of offering cost effective strategies to cope with a challenging operating environment.
Since the management buy-out from Deutsche Bank in 2001 for £25 million, Wood Mackenzie's growth trajectory has been impressive. Backed by a series of private equity investments, it has achieved EBITDA growth of 31% over the last 10 years. Wood Mackenzie's business model, described by Verisk's CEO as "build it once, sell it many times", has enabled it to scale its offering globally, often a challenge for consultancies which can be heavily reliant on a handful of key individuals. A high margin subscription-based model, internationally recognised brand and blue chip customer base receptive to buying additional services ensured that Wood Mackenzie was able to attract competing bids from a number of strategic acquirers in recent months, alongside consideration of a £2 billion IPO. The purchase price values the consultancy at 17x EBITDA - Hellman & Friedman paid £1.1 billion (15.6x) in 2012.
The strong interest from strategic acquirers is fueling interest from private equity investors, who see specialist consultancies' fragmented markets, high growth and recurring revenues, not to mention a strong exit environment, as appealing. In November, 3i-backed SLR Consulting completed its fifth deal in 12 months with the acquisition of upstream consultancy Challenge Energy.
Significant cash on the balance sheets of strategic buyers combined with private equity's need to invest funds will ensure further consolidation in this sector over the next few years.