Mercer Capital’s Value Focus: Professional Services Industry Newsletter is a biannual publication providing perspective on valuation issues pertinent to Professional Services professionals. The Professional Services Industry newsletter highlights the staffing and consulting segments. Each issue includes typically includes macroeconomic and industry trends, mergers and acquisitions review, guideline company pricing, and more.
Excerpting from the discussion:
Macroeconomic factors have been favorable for the professional services industry since the recession, and the second half of 2014 has seen a continuation of these trends. Unemployment dropped to 5.6% while corporate profits and private investment continue to grow in the U.S. These indicators suggest a favorable, though conservative, outlook for the professional services industry.
Despite a stronger economy, both the staffing and consulting sectors lagged the S&P 500 over the past twelve months. The staffing sector has seen median stock price decline of 6.2% during 2014, compared to an increase of 58.5% during 2013. Current and forward EV/EBITDA multiples for the staffing sector are 10.7x and 7.7x, respectively. The consulting sector has seen a median stock price decline of 2.7% in 2014, although the sector was up 35.8% in 2013. Current and forward EV/EBITDA multiples for the consulting sector are 10.9x and 9.2x, respectively, which implies weaker EBITDA growth relative to the staffing companies. Overall, firms in the professional services industry saw exceptional growth in 2013, but lagged the S&P 500 significantly in 2014 as growth prospects have become more tempered going forward.
This issue also includes the special supplement Fairness Opinions: Evaluating a Buyer’s Shares from the Seller’s Perspective.
To read the entire write up, download the newsletter (pdf) here.