Management consulting firms help organisations respond to operational, technological, regulatory and strategic challenges. The sector covers a broad range of specialist services, from governance and supply chain advice to digital transformation, organisational development and sustainability.
Published in 2023, this whitepaper provides an overview of the management consulting market, the areas expected to support its growth, the characteristics influencing business valuations and selected examples of M&A activity.
The global management consulting services market was valued at $316.6 billion in 2021 and was forecast to reach $814.6 billion by 2031, representing a compound annual growth rate of 10.6%.
Within the UK, consulting activity was expected to grow by 13% in 2023 and a further 12% in 2024. These forecasts followed estimated sector growth of 25% in 2022, when consulting firms experienced increased client demand relating to digital transformation, cost reduction and sustainability.
The areas expected to support further growth included:
Periods of disruption and change can increase demand for external expertise as organisations seek to manage new risks, improve performance and adapt their operations.
The consulting market contains a diverse range of firms, from multidisciplinary providers to businesses specialising in particular industries, geographies or areas of expertise.
The whitepaper groups the market into five principal areas.
Governance, risk and compliance consulting helps organisations identify, assess and manage threats to their operations, finances and reputation.
Relevant services include:
Demand for these services is influenced by events including cyberattacks, political instability and climate change, all of which can create financial and reputational risks for organisations.
Operational consulting focuses on improving how an organisation functions and uses its resources.
This includes:
These services can support organisations looking to reduce costs, strengthen supply chains or improve the efficiency of their internal processes.
Organisational consulting addresses the structures, people and capabilities required to support business performance.
Areas within this part of the market include:
The quality and effectiveness of an organisation’s workforce can be an important consideration during periods of growth, transformation or wider market disruption.
Technology consulting helps organisations introduce, connect and make better use of digital systems and information.
The landscape includes:
The increasing volume of data available to organisations, the emergence of advanced artificial intelligence algorithms and the expanding pool of data science talent were all contributing to the development of this market.
ESG and sustainability consulting supports organisations responding to environmental targets and increasing expectations around corporate responsibility and transparency.
Relevant services include:
The rise of socially conscious consumers and greater consumer activism were placing pressure on businesses to demonstrate responsible and transparent practices.
The value of a consulting business is influenced by a combination of management quality, market positioning, technology and financial performance.
An experienced, mission-driven leadership team can be an important source of value.
Specialist knowledge developed through primary research, human intelligence and forensic analysis can help a consulting business differentiate its services. The ability to adapt those services for different customers, including governments, multinational businesses and law firms, can also create a more diversified client base.
Consulting firms operating in areas affected by cybersecurity threats, political disruption, climate change and globalisation may benefit from increasing demand for specialist advice.
The growth of a more interconnected global economy was also leading organisations to seek cost-effective ways to understand and transfer risk.
Access to large volumes of data and the ability to use advanced analytical technology can enhance a consulting firm’s capabilities.
Artificial intelligence, data science expertise and proprietary technology can support the delivery of more sophisticated analysis and potentially strengthen a firm’s market position.
The financial profile of a consulting business remains central to its valuation.
Relevant characteristics include:
A diversified range of services can provide multiple sources of income, while recurring revenue models may create greater visibility over future financial performance.
The valuation metrics included in the April 2023 whitepaper provide a historical indication of how UK management consulting businesses were being valued at the time.
Publicly listed UK management consulting companies were shown at the following multiples:
Private management consulting businesses were shown at indicative multiples of:
These figures should be understood as historical sector benchmarks rather than current valuations for individual businesses.
At the time, global economic headwinds were affecting valuations. However, firms with specialist service offerings or a differentiated geographic position could attract higher valuation premiums.
Strategic acquisitions can allow consulting firms to expand their geographical reach, enter new markets or add specialist capabilities without building an entirely new practice internally.
This approach was becoming increasingly common following the growth of remote working.
In March 2023, Accenture announced its intention to acquire Optimind, an independent Paris-based consulting firm.
Optimind provided advisory services and solutions to insurance companies, banks and large corporate clients facing challenges relating to competitiveness, transformation and regulation.
In 2022, EVORA Global secured backing from Bridges Fund Management, MSCI and Farview Equity.
Advised by Polestar CF, EVORA Global works with major organisations in the real estate sector. The investment was intended to support the company’s international expansion and further development of its technology platform.
McKinsey & Company acquired SCM Connections in 2022.
SCM Connections specialised in technology-enabled supply chain transformation. The acquisition was intended to strengthen McKinsey’s supply chain transformation capabilities while allowing SCM Connections to serve more clients at greater scale.
The market presented opportunities for firms with specialist expertise, adaptable services and exposure to areas of increasing client demand.
The valuation drivers highlighted in the whitepaper point to the importance of:
For consulting firms considering expansion, investment or a future transaction, strategic acquisitions could also provide a route into new markets, geographies and specialist capabilities.
Management consulting encompasses governance, risk and compliance, operations, organisational consulting, IT and technology, and ESG and sustainability. Services can range from due diligence and supply chain advice to data analytics, talent management and net-zero strategy.
The main areas expected to support growth included digital transformation, technology, cost reduction, cybersecurity, sustainability and the transition to net zero.
Valuation drivers include the experience of the management team, the quality and diversity of the client base, specialist knowledge, market positioning, technological capabilities, income diversification and the presence of recurring revenue.
The April 2023 whitepaper showed public UK management consulting businesses at current multiples of 1.61x revenue and 14.7x EBITDA. Private businesses were shown at indicative ranges of 1x to 2x revenue and 5x to 7x EBITDA.
The whitepaper identified higher valuation premiums for firms with specialist service offerings or differentiated geographic coverage.
Acquisitions can provide an efficient way to enter new markets, extend geographic reach and add specialist expertise without developing a new practice from the ground up.
The selected transactions featured consulting businesses operating in insurance and regulatory advice, ESG and sustainable real estate, and technology-enabled supply chain transformation.
