Episode: 510 |
Greg Fincke:
Managing Director of Equiteq:


Greg Fincke

Managing Director of Equiteq

Show Notes

Greg Fincke is a Managing Director at Equiteq, a global sector focused investment bank that works with entrepreneurs in the IT services and management consulting sectors to create exit strategies. They have offices in London, Singapore, New York with smaller outposts around the globe.  They typically advise on companies with 3-25 million EBIT range, and revenue up to 200 million. The firm has 70 members around the world and did 20 transactions last year with an aggregate value of a billion. An expert in M&A deals, Greg discusses how the big deals are typically handled.

What it Takes to Build a Sellable Consulting Firm

The conversation focuses on the question of what it takes to build a sellable consulting firm. Greg suggests that one of the key factors to consider is key person risk; if a potential buyer is looking at a buy versus build situation and the equation starts becoming too expensive for the buy, it may be difficult to close the transaction. To build value and reduce the risk, it is important to have multiple people who can drive the business forward. Other factors to consider include developing a strong brand, having a good network of clients, a diversified client base,  and a good mix of services or products. Additionally, it is important to have a good relationship with other consultants, vendors, and potential buyers. Finally, it is also important to focus on long-term goals and invest in the growth of the firm. Greg explains that when looking at the financials of the firm gross margin is an important factor. Buyers typically want to see firms with a gross margin of 40% and discounted when under 40%. When thinking about valuation, you’re looking at how the business looks financially and what they do.  Greg talks about gross margins for consulting firms when the owner is selling the business. He explains what the two types of gross margins are and how to calculate partner cost, and typical multiples are for a consulting firm. 

Scaling a Consulting Firm

This conversation focuses on the difficulties of scaling a consulting firm. On one side, there is the need to acquire new clients and promote the services of the firm, and on the other, there is the need to create, onboard and teach new consultants. Achieving a balance between these two elements is crucial, as buyers are looking for firms that can deliver services that scale, on both supply and demand, and are willing to pay a premium for it.  Greg talks about buyers’ preferences, suggesting that they would rather work with firms that have good web traffic and reputation and are able to generate inbound leads, rather than those that need to do a lot of manual labor to grow the sales side and bring in clients. He explains why they consider IP an important factor of consulting services. He talks about talent recruitment and retention, and the value of a firm that offers a strong career plan and training and coaching systems as this demonstrates the ability and control to scale with in-house talent instead of relying on recruiters to find talent which can be unreliable and expensive. 

Beyond Corporate and Private Equity

According to Greg, the best options in firm valuation in management quality are how well companies are run, retention, sales and profit growth, and who your clients are and how you engage with them. Fortune 500 and private equity are the two most valuable in the market, and vertical specialization. From a delivery model, being able to deliver fixed fees on good margins is most desirable. 

Smaller consulting companies are seen as less valuable because their financial spend is significantly lower.  These companies tend to engage in one-off consulting projects and do not have a consistent spend on consulting, making them less desirable to broker deals. Greg states that the buyers for deals have changed over the last five years and shares a few examples of company M&A his company has facilitated. 

What Partners Can Expect when they Sell the Firm

Greg tells what partners can expect in terms of a percentage and timeline. The numbers vary widely depending on the buyer. He explains what can happen to the team after a sale, and how it often inspires an entrepreneurial spirit. He mentions that often buyers are looking for a new service line and that the synergy between companies should accommodate this growth and value, in this scenario the team stays independent, there may also be an integration of teams. 

Greg reflects on how clients move forward after selling  a firm, and how often they take a role in the management team of the larger company, and some have retired from business  to sail around the world, or just retire, but he hasn’t encountered any who regret the sale or decide to start a new business.

He talks about the advice he gives companies when the founders are not quite ready to sell such as having a goal for the sale,  this entails examining what the bottlenecks for growth are, whether that is client or talent acquisition. Greg helps them focus on the goal and target market growth. This may include building talent to open doors, and investing in marketing.  He talks about the buyer universe for smaller firms, how this differs from the larger M&A buyers, and who takes care of the billion dollar deals. 

Greg shares how his company secures clients, his team’s laser focus on a specific industry, and the type of advice they give clients. 


  •   02:42 Exploring the Value of a Consulting Firm: Key Person Risk and Building Value
  •   10:43 Scaling a Consulting Firm
  •   13:16 Growing Sales Through IP and Recruiting Processes
  •   17:01 Management Quality, Retention, Sales and Profit Growth, and Client Engagement
  •   22:19 Private Equity and Strategic Acquisitions in the Consulting Space
  •   23:53 Selling a Firm: Earnout Periods and Expectations
  •   37:35 Recent Private Equity Acquisitions in the Management Consulting Industry
  •   39:42 Billion Dollar Deals in the M&A Space
  •   40:32 Exploring the Range of Options in the Consulting Industry
  •   43:37 Building Value in the Consulting Industry
  •   47:09 Resources for Learning About the Consulting World


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Greg Finke, Will Bachman


Will Bachman  00:01

Welcome to Unleashed. Unleashed is produced by Umbrex. You can find us@umbrex.com umbrx.com. I’m your host will Bachman. And I am excited to be here today with Greg Fink, who is a managing director at equity tech. He’s the CO head of the Americas. Greg, welcome to the show.


Greg Finke  00:22

Hey, well, thanks for having me.


Will Bachman  00:24

So, I have been looking forward to this episode, this discussion for a long time. And I’m glad we finally managed to schedule it. Tell us first just give us a quick snapshot of what is equity tech?


Greg Finke  00:38

Yeah, so equity Tech is a global sector focused investment bank. Really what that means is, we work with entrepreneurs in the consulting and IT services space, that are looking to create an exit whether it’s through private equity or strategics. And we advise on those transactions. I’m we’re a global business. So we have offices, London, Singapore, New York and elsewhere around the world.


Will Bachman  01:06

What’s the typical size of consulting firm that you would help to sell?


Greg Finke  01:12

Yeah, so typically, our clients are in the three to 25 million of EBIT o range. You know, we’ve seen that move around at times, and but you know, no, real hard, hard and fast, but that’s typically our range. So


Will Bachman  01:27

3 million of EBIT, da to 25 million of EBIT da, okay. In that range. And what’s that typically translate to to revenue? I guess some firms are more have better margins than others. But what’s sort of the typical revenue size?


Greg Finke  01:41

Yeah, typically, low teens have a revenue up into, you know, just over 100 million. Hundreds, 200 million of top one.


Will Bachman  01:52

Okay, cool. And you said your global, roughly, how many? Can you give us a sense of size of your firm in terms of maybe number of employees or firm members or number of deals that you do every year? Or total deal value size? or something? Yeah,


Greg Finke  02:10

yeah, happy to. So we’re about 70 people globally, New York and London are two biggest offices, followed by Singapore. And then we smaller outposts. So Boston, Paris, Sydney, as well. We did just about 20 transactions last year, the aggregate value of about about a billion. And that’s a good year for us that and we’re, we’re happy with those types of numbers, we don’t need to be doubling that to make our business work. So that’s, that’s kind of a good steady state for us.


Will Bachman  02:42

Okay, so here is the money question. Here’s the gold question. I think I want to know, and a lot of listeners probably want to know is, what does it take to get a, you know, how do you value a consulting firm slash? What I want to explore in this episode? What are some things that a leader or founder of a consulting firm should do long term if she wants to, you know, eventually sell this practice wherever to 510 years from now, just be thinking ahead. Like, what is sort of a sellable consulting firm? So I’ll let you take that, you know, start anywhere you want, and that in that kind of general set of questions.


Greg Finke  03:20

So So one of the reasons we have you know, a, I wouldn’t call it on the floor, but we play in the space, we, you know, the size range we do is, you know, below 10 million, there tends to be a lot of concentrated key person risk. And that creates a real challenge for a buyer looking to, you know, put down acquisition dollars, because it seems risky, and, you know, they’re looking at a buy versus build. And if they’re, if the equation starts getting very expensive for the buy, they feel like they could maybe find that person or similar person and hire them much more cost efficiently. It gets hard to get a transaction done. So I think then that leads to one of the risk factors is key person risk. So when we’re looking at building value, it’s about having multiple people that can drive the business forward. Another component of that, you know, it, we clients are much larger that have this problem, but also client concentration. So having a diversified client base at some scale, you know, starts starts making the numbers get larger in terms of total revenue. You know, every buyers been burned by a client that had been with, you know, a firm for 15 years. And then as soon as the deal gets done goes away, and it’s a significant part of the revenue so there’s a lot of a lot of horror stories there. So it’s something but you know, the investor community is is very, very aware of and it plays into valuation and transact transact stability. So you kind of crossed some of those initial hurdles, and you’re looking at valuing a business. And you’re, even though the multiples aren’t based off the gross margin, gross margin is a is a natural place to look when trying to understand value. So really, what gross margin is assuming utilization is, is in line, you know, 70s on a normalized basis 70% on a normalized basis. You know, it’s really how much? How much extra can you charge the clients for what you do. And and that can be, you know, through proprietary methodologies, frameworks, IP, but it’s value above just your people’s time. And so, you know, buyers typically want to see firms in the 40 40%, and you start getting discount, discounted when you’re under 40%. And then, you know, once you get in the 50, to 60%, you’re sort of at the upper end overseas, buyers and investors kind of a question as to is it sustainable? Why is typically, above and beyond where, where, where most firms are. So when you’re thinking about valuation, you’re looking at, if you’ve crossed those hurdles, how’s the business look financially, and then you’re, you’re looking at what they do. And that’s, that’s where it’s really hard as a to look at the different industry verticals, but you’re then looking at multiples and comps and trying to apply multiple to the financials.


Will Bachman  06:56

When you say gross margin for a consulting firm, can you help me understand that math, because the, if the client is paying $100, then minus the gross margin, what’s included in that, for example, the partner of the firm might pay out to herself, you know, the full balance of that. So is that kind of profit, or they, they could be calling that profit margin, or they could be just calling that their own sort of salary slash compensation. So it’s a little hard to, for me to understand what we mean by gross margin when the owner is running the firm and taking all the cash that is, you know, leftover, right?


Greg Finke  07:41

Yeah. So there’s two types of gross margin, if you will, there’s a project gross margin, which then rolls up into the corporate gross margin, if you are the company, gross margin. So maybe I’ll tackle the company gross margin first. So what you would do is take your total revenues, for whatever time period monthly, quarterly annually. And then below that, subtract out the total delivery costs. Now, what you may be doing, if you want to calculate this post post, the end of the year is doing a bit of reengineering of what a partner cost would be. And what I mean by that is, it’s pretty clear if you have people that are just delivering, they’re not selling, they’re not managing the business 100% of their cost goes into cogs. So that’s subtracted by revenue, then for partners, what we, what we say is to have your normalized, have a normalized calm, and then divide it up by how much time is spent delivering, selling, managing the business. And then what is over and above that treat is as distributions or dividends. And that would be your EBITA as well, if you just if you’re distributing out 100%. That piece is your EBITA which if you ever go to sell, you have dollars, you can point to to say yes, I would give that up in a transaction, if I’m getting a multiple on that. So maybe I’ll pause there and answer any questions. If that makes sense. Well,


Will Bachman  09:16

it’s helpful. What are typical multiples for consulting firms? How do you base it off of revenue or EBIT da or gross margin or


Greg Finke  09:27

it’s simply revenue or EBIT? And different buyers do it differently? You know, I would say, in this market, we’re seeing revenue multiples, typically in the two to three times range, again, depending on what you do, and then market and things like that it can vary, and then on on any button multiple, you know, nine to 12 times either some of those numbers move depending on the financial profile of the business, but those are Those are good guardrails.


Will Bachman  10:02

Okay? So we said, one thing that you would look at is the company really needs to have built up not just one person who’s bringing in all the business and the Rainmaker, like the founder, but you want to have a firm where there are, there’s going to be a repeatable business development process with people that have been, you know, are, you know, more than one person is, you know, doing client development successfully. And you can imagine other people being trained up in that process. And there’s kind of a marketing engine happening, where it’s not just the relationships with the founder.


Greg Finke  10:43

Yeah, that’s right. And I, you know, I think the hardest, hardest part of growing and building a consulting firm, unlike other industries, is it’s equally hard to scale the supply and the demand side of the equation. So demand, you know, acquiring new clients, really selling your services, in parallel balancing, creating new consultants, onboarding consultants, teaching consultants, how to do things, the way you know, your your firm has codified them. And, and getting that balance, right, and having the sort of playbook if you will, but also having delivered on Yes, we can scale both the supply and demand side of our service offering. And that’s really what what gets buyers excited, because they’re typically looking to fill a gap in some part of their service delivery. So if they see, yes, you, you’ve checked that box, and you have something that can scale within my organization, I’m willing to pay a premium for that.


Will Bachman  11:52

Now, I’m guessing here, let me state this and tell me if I’m right or wrong, that a buyer would probably prefer a firm, even if it’s not just a single founder who’s doing the business development, they had a choice. And Choice A is there’s two or three or four or five principals who are out there kind of doing cold outreach, or calling people or networking or relationships or conferences and meeting people to bring some, you know, in clients versus that would be, you know, Option A option B is firm is built up some kind of reputation and some kind of name brands such that it’s just getting like inbound leads on the website, right, because they have some kind of, you know, good web traffic, they have some kind of reputation now that you’d probably prefer option B, where it’s not so dependent on human labor. But you’re you’ve got that, you know, market niche identified. Right.


Greg Finke  12:48

Yeah, I think that’s right, on balance. So yeah, you know, I think a lot can be a growing the sales side doesn’t have to mean bringing in expensive people to just go out on the market and look for opportunities. It can be really done through marketing and brand building. And, you know, making sure that you’re able to capture that into services.


Will Bachman  13:16

To what degree would you be looking at sort of unique systems or technology, or having built up some sort of unique capability? How, how much of a factor would that be?


Greg Finke  13:31

Yeah, it certainly is, I mean, we look at when we’re working with our clients, we look at IP as a very important part of every consulting IT services business, and it can be IP to deliver your business, I pay to win business or IP to run your business. And really, what we’re looking for is to demonstrate that that IP gives them an edge. And that could be, you know, through retention, right, they have super low retention, they built an IP that, you know, some IP around how to, you know, manage their people and interact with their people, right. So, like, you can be creative with it. But also, you know, they have better margins, because their IP allows them, you know, to be more profitable, or, you know, it allows them to sell more, so they’re growing at a rate I think we’re IP is most powerful is when it can be tied to revenue, but you can be pretty creative and in sort of showing how your, your IP and your frameworks, methodologies, drive value, and, and, you know, be able to quantify that.


Will Bachman  14:39

And then, what about on the kind of people side, the recruiting process method engine? To what degree is that something that you’re going to look at and evaluate?


Greg Finke  14:51

Yeah, it absolutely is. I mean, I, especially the last two years, where, you know, talent was really, really garrison in a lot of areas that still is, you know, we talk to our clients about is the ability to take a recent college graduate and make them productive, but not just stop there have the framework and the career progression model, they can move all the way up to the highest partner level of principle level, whatever it may be, and really become a driver, you go from being able to deliver on projects to deliver on revenue. And if you can put that whole career plan in place that have, you know, competency frameworks, and coaching and training to help people advance that, that becomes seen as very valuable, because it really allows you to control your ability to scale, and not be reliant on having to go through recruiters and into the market to pull people out, which can be unpredictable and expensive.


Will Bachman  16:02

So if you can grow your own engagement managers and associate principals and principals, that’s much better than if you’re dependent on finding and hiring those people from the from the market. Yes.


Greg Finke  16:15

Yeah. And you know, it, yes, 100%. Because, you know, if McKinsey, your if you’re taking people out of McKinsey, and they increase comp, you know, 50k will sound that directly impacts your ability to go higher at that level first, coming out of college recruiting, even though those jobs may be out there, they tend to be more loyal tends to be predictable, and you have better control over costs.


Will Bachman  16:44

I think that I’ve seen at one point, an aqua tech framework over like firm valuation, I was a few years ago, I saw that, do we do we miss any of those elements that you that you consider when you’re when you’re doing evaluation?


Greg Finke  17:01

You know, I think the the management quality is one that I think we rate pretty highly. And that’s, that’s about how well the business is run and sort of the reporting not whether, you know, whether you’re a good manager or not, but that that actually becomes pretty important for, for a lot of buyers. You know, we talked a little bit about people, but retention is, is a really important one, as well. You know, taught taught, we touched on sales and profit growth. You know, one one other piece, maybe where we we haven’t dialed in on is, who your clients are and how you engage with them. So, you know, fortune 500, and private equity, and their portfolio companies are kind of the two most valuable in markets. And then there’s vertical specialization and that is something else. But you know, going after companies that can have have big wallet, law ad spend, are the best to end markets from a value perspective. And then from a delivery model, you being able to deliver fixed fee on margin, with with good margins is most desirable. TNM is generally okay, but it can be a little easier for you to get squeezed on margin. And then the one that’s the most lucrative for owners, but seen as for owners today, but seen as risky for investors is a gain share model, where you’re taking a percentage of savings or some other financial outcome. that’s seen as the riskiest. So, you know, for us, you having either fixed fee or TNM. And working with large, large corporates or private equity is, is an important value driver as well.


Will Bachman  19:11

Beyond corporates and private equity, walked down the chain a little bit more for me, what are sort of like the middling kind of options like oh, so So and what are kind of the crummiest options in terms of client and markets?


Greg Finke  19:23

Yeah, so I mean, it really, it really comes down to their ability to spend money on consulting. So you know, the, maybe 500 million and up is probably the, like the third in the list. And again, those would be 500 million that don’t have private equity investors. They’re just they’re standalones below that. And what we see is that people may engage a on a consulting projects on very much one off engagements and they may go away for a few years so they’re not spending Couldn’t consistent dollars in consulting. And that’s why they’re they’re seen as less valuable is that you got to break into these companies over and over again. And it’s harder to sell on work. It’s not that they’re bad companies. It’s just their financial spend is significantly Well, we’re


Will Bachman  20:22

who are typically buying these consulting firms? So out of the 20 that you helped broker deals last year? What’s the typical buyers?


Greg Finke  20:31

Yeah, so it’s been changing. So five years ago, it was about 25% of buyers in our space were private equity 75% were strategics. It’s now 5050. So private equities come into this space, much more meaning full way than they ever had prior. And so that does two things. It creates plot, new platforms without they’re investing in and then their platforms are acquiring bolt on acquisition. So we’ve really seen a lot of growth from private equities, looking for platforms and their platforms looking to make acquisitions. And the other in the strategic side. It’s a big range for our clients. I mean, Accenture is kind of the, the 800 pound gorilla in the room in a sense in that they spend about two to $3 billion a year on m&a on consulting firms. And that is they are the number one acquire of businesses in the world by number of acquisitions. So they are just a major player in this space, but you know, even EY they’ve split off their consulting, business from accounting, and the consulting firm is they’re gonna spend two and a half billion on m&a. Then you have the it outsourcers, you have other consulting firms, and then you have some of the marketing services firm. So it’s actually a very robust market from options in terms of different strategics private equity and private equity platforms.


Will Bachman  22:19

So Accenture is the number one acquire in the world by number of acquisitions. That’s amazing. Like, how many do they do? I guess they’re doing a lot of these small


Greg Finke  22:28

shops is north of 60 a year? Wow. And yeah, they’re full team set up globally. Corporate, I mean, their corporate development function is very mature. Yeah, that’s it’s a core part of their growth.


Will Bachman  22:44

What sort of firms do they acquire?


Greg Finke  22:48

You know, I’ll just give an example. Just to highlight the range of some of the things we’ve sold them, we sold them a ServiceNow consulting firm, focused in Western Canada, and they had a thesis around ServiceNow. And expanding in Canada, we also sold them a company called HRC, which is a retail specialist consulting firm, that very niche boutique, and they bought that one as well. And we sold them Myrtle Consulting which larger operational consulting manufacturing. So they saw one of their big thesis is on the next generation of industry and connectivity. And then these guys were doing to operational strategy work within within large manufacturing competence. So it’s, it’s really a range from you know, it, operational consulting, strategy, consulting, and everything in between, if you will.


Will Bachman  23:53

What should a owner of a firm or if its partners partners expect if they sell their firm? What’s the typical kind of earn out period? How long did they have to stay on and so forth?


Greg Finke  24:05

Yeah, this is a, it’s a great question well, and it’s the hardest one to handicap going into a transaction. So what we we tell our clients is be prepared for 6040. So when we’re talking valuation, be prepared for 60% cash that close of 40% in an urn out up to three years. The reality is it can be ever anywhere from 60 to 100%. But most likely, it’ll be in the 60 to 80% cache close with 40 to 20% in a earnout of some form, typically two to three years. And those are now to vary significantly by what the acquires are comfortable with, which is why in a competitive process, having options and being able to compares is important. Some will have it on revenue. Have some of the gross margin, someone has it on EBITA, some on retention, and others a mix some combination of one of those four. So it’s a real range on on what goes into Internet?


Will Bachman  25:16

How should founders think about what’s gonna happen to their teams, if they, you know, when they if they sell their firms? You know, in terms of teams, you know, I mean, you had this culture where it’s a small boutique firm, and now it’s getting acquired by a big one of the major global firms what, what do you see typically happening to the teams that stay behind?


Greg Finke  25:39

Yeah. So, you know, a lot of our clients have stayed and, you know, simple things happen. And, you know, I’ve had, I sold a company, to a very large, strategic, if you will, and I had one of the management, one of the members of the management who had a very small piece of equity, reach out and say, I want to do with those founders did in five, seven years, I’m gonna call you up. So one thing, I think we’ve seen it, we had another company, they went through a transaction, they were right below the equity line, they started their firm and sold, it did incredibly well. So one thing I think a transaction does is it does, it will inspire some group to want to be entrepreneurs and say, Wow, that was really cool. I saw you know, with so and so built, and had an exit, I want to do that. So that’s, that’s one thing we see and heard a lot of stories about. But mostly, it’s about the integration plan and why they are buying, buying the business. So, you know, it breaks down into really one of two. There are probably other other reasons, but two primary reasons. One is they want a new service line. So you’re doing something tangential to what they already do. The belief is, if they acquired this capability, there’d be synergies. And, you know, the two service lines together would create more value than just having one and not the other. So, in that scenario, the team says, pretty independent. There’s nothing really to integrate it into in terms of delivery, there’s probably a little bit of administrative there certainly would be administrative changes and systems and things like that. But the buyers generally in that, in that scenario, are not looking to disrupt the team, because it’s, it’s very separate from their other service lines than a case where they have that service line, they’re looking to add scale. That’s just that is much more of a bespoke integration, where, you know, the the management team really has to teams have to work together to design you know, how those people are going to be integrated. And that can be more of a challenge potentially for, for some junior folks being being brought in with with another existing team. I don’t think we’ve seen it, you know, have worse results. But I think it is more of a challenge than if you’re doing acquisitions a new service line.


Will Bachman  28:27

I imagine that you keep in touch with some of the founders who you help them sell their firms after they do that. I’m curious your perspective on over the years, what you’ve seen people do after selling a firm and how satisfied they are with their life. After leaving, maybe they regret it, maybe they’re delighted playing golf or whatever. But what’s what’s, what have you seen people do after after selling their firm.


Greg Finke  28:57

So a surprising number have stayed stick with the acquire post earnout. So they do their earn out. And then they stay. And a lot of it is they say I’ve already started a company. I don’t want to do it again. I had my reward for that. And typically what’s happened in these scenarios is the larger company, the acquiring company, has promoted them offered them, they found a role that they actually really enjoy. And it’s a role that they may not have had access to prior to becoming an entrepreneur. So, you know, some of our clients are, you know, managing teams that are, you know, five times what their team was when they sold and they’re seen as a global expert on the topic and are flying around visiting different offices as a internal global expert, and they’re like, this is pretty cool. I’ve never thought this job existed and I love it. So we have a lot of people stick around. We have some folks. Yeah, just just, I have a former client that circumnavigating the world and catamaran. With his family, we have people who have certainly used it as their retirement. We haven’t had too many that our client base. So go for number two, it’s either kind of been either the retirement path, or the or the you no stay stay with the company. No one we’ve heard from, it’s sort of said they regret it. But maybe they’re just not talking about. It could be a fair challenge.


Will Bachman  30:50

So you haven’t seen people going out there and say, Okay, I’m gonna start a new firm. Now. I did that for 15 years. I wanted other


Greg Finke  30:57

much fun. And yeah, I want to do it again. Yeah, that’s more uncommon, I think, almost, you know, they have some like, great, great new idea. But a lot of our clients have said, like, you know, I, I built a consultant scaled it, sold it, you know, I don’t, I don’t need to do it again. And, but I’m sure there’s someone out there that’ll do it.


Will Bachman  31:22

I imagined, at what stage? Do you start talking to the partners of firms? And, you know, is there cases where you start talking to them when they’re really not quite ready, and they need one or two or three years to get their firm in the right shape to sell? And what sort of the kinds of advice that you’re giving firms that are at that stage?


Greg Finke  31:47

Yeah, 100%. We’ve had companies we’ve spoken with and started the relationship when they are very small. I think what’s important, and where we become relevant, is having a goal and saying, you know, hey, we’re, we’re exci excise today. But, you know, we really want to get to why and sell and create an event. How should we be thinking about that? So that’s, that’s where our advice can be, can be more relevant? And then really, what we’re trying to help them figure out what are the bottlenecks for growth? And again, making it simple? Is it the client acquisition side? Or is it the talent acquisition side, and typically, one of the things we find that makes a big difference and sort of hitting those initial growth hurdles, is a lot of a lot of companies open the spectrum of what they do, and who they do it for, to be incredibly broad, because they don’t want to miss anything. And we actually give the opposite advice. And we say, be very focused on what service you’re gonna do for what industry and, and by having that focus, you’re going to know you don’t have to do that forever. But you’re going to start capturing market share being relevant, and then expanding from there. So that’s one of the things we often talk to our clients that are trying to hit some of these growth milestones, this is really having a focus on a perspective and a target market to go after.


Will Bachman  33:30

When you see firms that are maybe good on the talent acquisition side, and they have decent revenues, but maybe they haven’t been growing as strong, what sorts of advice to give them on client acquisition, how to how to get better there?


Greg Finke  33:47

Yeah, that’s, um, there’s a number of things we look to do. So a lot of a lot of companies want to hire sales teams. So if I hire a sales team, that helps solve it. Well, consulting services doesn’t lend itself well to a sales team, because it’s just it’s not a product, you’re you’re buying expertise. And so the only time a sales teams work if you’re able to productize some part of, of your of your solution that they could sell. So if that’s not the case, is really developing talent to open open doors. And a lot of that comes down to marketing. So thought leadership, having a differentiated perspective, and advancing that, you know, through through the channels to your end customers. So there’s no sort of magic bullet on how to solve the sales and marketing or the new client acquisition but our our advice is, you’re going to be better off developing your people to learn how to convert clients and Investing in marketing, then trying to bring on professional salespeople to, you know, try and bring in new clients.


Will Bachman  35:12

for firms that are, I’m curious both on both sides. So for firms that are smaller than you guys deal with, what typically do they do, if anything if they to sell their practice? And then my second quit window, once we talk about that, I’m going to ask you about the big large firms. But for small firms that are less than 3 million of EBIT da, do they have any? Like? Do they have any pathway? Maybe they’re too small for you to really engage with. But do those transactions even happen?


Greg Finke  35:43

Yeah, they certainly do. And part of why it’s hard for us. There’s some economic reasons, but also, it’s a different kind of buyer universe than the Accenture’s, the larger people that we engage with. So for them, it’s unlikely they would, they would buy a, you know, a 15 person consulting firm or 10, person five person consulting firm. So it is it’s going to be buyers that are less active smaller buyers that are just looking to talk in a service line. So, you know, the the advisor, network in that, for those types of deals or business brokers that can that can help. And then yeah, the deals certainly can get done. But typically, with buyers that are not, not as active in m&a, you tend to see deal structures that are not as favorable for, for for sellers, because they’re a bit more defensive. From from buyers. They’re just not as comfortable doing m&a. So it’s typically a smaller scale buyer. And that’s, it’s probably not something they’re doing regularly. And you’re your advisor could be your lawyer, or a business broker.


Will Bachman  37:14

What are these PE firm? Do with consulting firms? I, I, I’m unfamiliar with with that world, like so. Maybe give me an example? Or just tell me how do they typically run these things? And and then I’m just like a standard portfolio company that, you know, grow and then try to flip it and five years?


Greg Finke  37:35

Yeah, exactly. I mean, one, you, maybe you some of your listeners might know, is stacks, which does commercial due diligence for private equity firms. And they were acquired by Bluepoint. Private equity, we actually were hired to advise Bluepoint, they wanted our expertise on that transaction. And yeah, they’ve, they’re, they’re trying to scale it at our scale yet. Aggressively new geographies and new service lines? You know, I’m not, I don’t know what their exit strategy is. But typically, there’s a thesis around either the next private equity. So you know, having another change or control another investor, or or a strategic. So, yeah, that’s that that’s certainly one management consulting firm, if you will, strategy consulting firm that that took private equity back, there’s another one IGS out of Boston did similar, does similar work. And they’re backed by interlock, a private equity from LA. So those are two recent deals. And then just for us, we’ve, we sold a custom application development firm, called the latest to civc. And a data analytics consulting firm called Clear intelligence to Align Capital in the last three or four months. So it’s a pretty active market, I would say it is more heavily skewed towards the IT services base, but on the management consulting side, and there actually been a number of healthcare management consulting firms that have done really well.


Will Bachman  39:23

And then how did the big deals happen? So you said that you do up to I think, we said, up to maybe 100 million in revenue, sometimes you talk, I don’t know PwC acquires Booz and company or something like those big deals who’s who’s typically handling those.


Greg Finke  39:42

Yeah, so on those billion plus deals, we’re not typically involved love to be that someday, but those are those are done by typically bulge bracket. Banks, the Morgan Stanley’s the Colemans of the world. You know, one of the one of the attributes serve our market is that there aren’t a lot of billion dollar deals done in this space, it’s maybe one a year at at most. So it’s not a huge volume. And at that upper end, a lot of the deals that are done are between that, called 50. And 250 million of enterprise value in the industry is very much a barbell shape. There’s a lot of smaller companies, there’s not a lot in the middle, then there are quite a few scale scale consulting firms.


Will Bachman  40:32

Interesting. So for what else? Should I ask you about this whole space that, you know, what are the other kind of intricacies or things that surprise and fascinate you about this space that most people who are consultants would not know?


Greg Finke  40:51

Yeah, I mean, I think what is always enjoyable for me, and working with our clients is really exploring the range of options that are out there. I mean, I think it’s, you know, it’s, it is a, it is a massive marketplace. And there are a lot of strategic and private equity options that when you when you do something creative, it can can really unlock significant opportunities and value. So, you know, I think as people are thinking about an exit, we did speak about Accenture and EY. But there are a lot of other companies out there that that are looking to grow through m&a. And it makes sense because this is a these businesses are hard to grow organically, right. And so if you figured out a way to deliver a unique service, and scale it, you’re building something very valuable. So it’s a and it doesn’t have to just be one of the large strategic set that would where you’d end up. How


Will Bachman  42:07

do you and your firm do business development and build a level of trust with a set of partners that they’re willing to entrust your firm with the, with the sale of their firm?


Greg Finke  42:21

Yeah, so I mean, I like to think we do a pretty good job of staying focused and trying to deliver free insights to the market through our reports and content we we put out. So one of the things we take very seriously, we, we say laser focused on one sector, so everyone on our team, you know, from our analysts, to managing directors are, are only doing really one action, which we think is important. And then we, we have a perspective, and I don’t think I’m giving anything away. We like to give advice to our clients around building value both internally. So what can you do in your firm to build value, and then provide that external perspective on the market, and in our view is, if we can, we can do that, and we’re like, people like working with us, the work will come. So it’s, at the end of the day, a very rewarding job, working with clients over multiple years to get their business to the right place, and then see that economic return and reward for all the hard work they put into building their business.


Will Bachman  43:37

I imagine that the universe of these firms is small enough that you’ve probably identified most of those firms that are in that, you know, three to 25 million, you know, EBIT, da type thing. I mean, they’re identifiable, right.


Greg Finke  43:51

They are, but in the US alone, there’s probably about 1000. Is that right? Yeah. And IT services and management consulting. Wow,


Will Bachman  44:01

that is pretty amazing that there are 1000 consulting firms. That’s,


Greg Finke  44:06

I mean, it’s just at that size. And just in North America, and I think that’s one of the fun parts about this market, you know, there. I mean, I’m surprised on a seems like a weekly basis, I’ll meet a consulting company, they’ll be much bigger than I thought. And I would have I’ve never heard of what they did before. How, like how I spend my entire day with consulting firms every day, and I’m still surprised. So there’s a lot, a lot of really cool firms out there.


Will Bachman  44:43

1000s of does your firm kind of try to keep tabs on all 1000? And just, you know, keep track of the founders in touch base with him periodically, and that’s a lot of firms.


Greg Finke  44:52

Yeah, we do. I mean, we certainly have our distribution lists and we try and share insights with when, when asked But we certainly don’t have personal relationships with with all those firms. So our team, we have a few, we’re not huge, but we have a few people in the organization, their, their role is coverage. And their day job is to speak with owners, private equity firms and strategics. And just know the market know what’s happening. Because it is big. We can’t We can’t kind of just cover it haphazardly.


Will Bachman  45:31

Alright, so quick, few questions around media diet. What do you in terms of what? What do you read to stay on top of the consulting industry? Any newsletters, websites, anything that you typically follow? To stand? Yeah.


Greg Finke  45:52

So there’s a couple good ones. E to E is a, it has all like you can find every SAP transaction every day, it’s called channel E to E is a website. And you can look by every acquisition cognizance made every acquisition different, different spaces. So it’s a broader, sort of free, free, free data source. But it has good, good, good sort of lists of deals and in particular spaces. So that’s a good one. And then I think it’s consultancy.com consultancy.uk, maybe lists every every recent transaction. And they’ll highlight like, if it’s broader than the UK, I think you can go to the go to consult and see die UK, you can then switch to a different country. But that’s, like consulting.us, what it is. So yeah, they’ll have all different news reports, but also every deal in the space that happens, they’ll put a little blurb up. So those are two good sort of free websites you could use.


Will Bachman  47:09

How about podcasts, any podcasts that you follow on the consulting world?


Greg Finke  47:15

So one resource I use as collective 54, which is a network of consulting owners, and Greg Alexander, who runs that does a podcast that I’ll listen to from time to time.


Will Bachman  47:29

All right. How about any books, any books favorite books on the consulting world?


Greg Finke  47:35

Oh, man. We, I don’t know if they would be pure consulting, we have to just look at my library because I get handed these books all the time. Not off the top of my head. I’d have to look i There are some really good ones out there. And but yeah,


Will Bachman  47:57

yeah, I don’t, I don’t know any books on, like the current state of the consulting world. But certainly, the the world’s newest profession is pretty good in my Chris McKenna about the history of consulting. And he’s a McKinsey alum and a professor in in the UK. And he wrote about the rise of the management consulting industry. And then there’s another one, the Lords of Strategy, which is, which is pretty good about kind of the rise of strategy as a piece, which I wasn’t really aware of. But, you know, like the consulting firms didn’t really start as strategy firms. McKinsey was not really a strategy firm when they started. And so the Lords of Strategy is pretty interesting about Bain BCG and, and then how McKinsey moved away from like, org design and, you know, productivity type stuff to more strategy.


Greg Finke  48:49

Yeah. So they want to, I’ve mentioned Greg Alexander, but he wrote a book called the boutique, which is pretty good as well.


Will Bachman  48:57

Okay. Cool. So if listeners are intrigued, and they want to make sure they get your newsletters and reports and maybe follow up, where would you point them online to learn more about equity tech,


Greg Finke  49:11

equity tech.com to sign up, and we’ll make sure you get all our content and thought leadership.


Will Bachman  49:17

Okay, and I will put that link into the show notes, but just just help listeners who aren’t looking at the show notes. How do you spell that for us?


Greg Finke  49:24

Yeah. equ i teq.com.


Will Bachman  49:30

All right. That we will include that link in the show notes. Greg, this was a fantastic discussion. Thanks for helping enlighten me about you know how to value consulting firms and how to think about selling your firm someday. Maybe one of our listeners will become a client of yours and, and you’ll help them with an exit. It’s been great speaking with you.


Greg Finke  49:52

Yeah, thanks so much. Well, really enjoyed it. Take care.

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