The acquisition of Guidehouse by Bain Capital is the most recent attempt by private equity companies to acquire suppliers of professional services. Image: ZUMA PRESS/NIKOLAS KOKOVLIS
A $5.3 billion agreement, including debt, was announced by Bain Capital to buy Guidehouse, a consulting firm that provides advice to corporations and government agencies.
On Monday, the companies made the arrangement public. This is the latest action taken by private equity funds to acquire professional service providers as the development of consulting in some sectors slows down. For an asset class that is having difficulty finding exits and returning funds to eager limited partners, it is also an exceptional offer.
PricewaterhouseCoopers’ U.S. public-sector consulting business was bought by Veritas Capital, an investment firm that focuses on firms at the nexus of government and technology, in 2018 for an unknown sum. The company was then renamed as Guidehouse.
Guidehouse offers a range of services, including technology and management consulting, to state and local governments, corporations, and federal government organizations such as the Departments of Veterans Affairs, Homeland Security, and Defense.
Guidehouse, a McLean, Virginia-based company, has grown through a number of acquisitions of its own, including the public-sector advising practice of Grant Thornton last year, Dovel Technologies in 2021, and Navigant Consulting in 2019. As a result of the acquisitions and internal development, Guidehouse’s revenue increased from around $600 million in 2018 to an anticipated $3 billion by 2023, according to the company.
Chief Executive Scott McIntyre of the firm stated that if the sale goes through, Guidehouse would continue to work with governments and companies in tandem and will stick to its acquisition strategy. He also mentioned that he anticipated Veritas to keep Guidehouse for a period of four to six years.
McIntyre stated, referring to Veritas, “We’ve been operating the business for half a decade under their ownership and sponsorship planning on an exit to another private equity firm for the majority of that time.”
After a slowdown the previous two years, private equity firms ramped up their deal-making in the US consulting sector in 2021 and 2022. However, this year’s resurgence was put on hold as buyers and sellers from various industries clashed over price.
Businesses have noticed a slowdown in merger and acquisition activity this year, which is consistent with the general state of transactions in the United States. There have been fewer realizations for private-equity firms; in the third quarter, there were 46% fewer exits, or sales of the firms’ owned enterprises, than there were in the same period last year.
According to data company Dealogic, there were 37 management-consulting M&A deals worth $1 billion in the United States last year until November 2. This year, there have been 31 agreements totaling $100 million.
The Guidehouse acquisition occurs at a time when many of these service providers’ growth in consulting income is slowing. According to consulting sector data supplier Source Global Research, U.S. consulting is predicted to expand by 8% to $94 billion this year, down from 10.5% last year and from 11.1% in 2021. According to Source Global, the consulting industry is expected to grow by 8% globally this year to reach over $250 billion, then increasing by 10.7% in 2022.
There is significant runway development in this business, according to Joseph Robbins.
