Consulting Firm Spun Off From PwC in 2018
Bain Capital said it would acquire Guidehouse, a consulting firm that advises government organizations and businesses, in a deal valuing it at $5.3 billion including debt.
The firms announced the agreement on Monday. The Wall Street Journal reported on Sunday night that the parties were close to a deal. The move is the latest by private equity firms to scoop up professional services providers as consulting growth in certain areas slows. It is also a rare deal for an asset class that is struggling to find exits and to return capital to awaiting limited partners.
In 2018, Veritas Capital, which invests in businesses at the intersection of government and technology, acquired the U.S. public-sector consulting business of Big Four accounting firm PricewaterhouseCoopers for an undisclosed price and rebranded it as Guidehouse.
Guidehouse provides management and technology consulting and other services to federal government agencies including the Departments of Defense, Homeland Security, and Veterans Affairs, and to state and local governments, as well as businesses.
Based in McLean, Va., Guidehouse has expanded in a series of its own acquisitions, including Navigant Consulting in 2019, Dovel Technologies in 2021, and Grant Thornton’s public-sector advisory practice last year. The purchases, along with in-house development, helped fuel Guidehouse’s growth, bringing its annual revenue from nearly $600 million in 2018 to an expected more than $3 billion for 2023, the firm said.
Guidehouse would continue to jointly serve governments and businesses and retain its strategy around acquisitions if the deal closes, the company’s Chief Executive Scott McIntyre said, adding that he expected Veritas to hold Guidehouse for four to six years.
“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 most of that time,” McIntyre said, referring to Veritas.
Private equity firms stepped up their deal-making in the U.S. consulting industry in 2021 and 2022 after a lull the prior two years, but that rebound came to a halt this year as buyers and sellers across sectors butt heads over pricing.
This year, firms have seen a lull in mergers-and-acquisition activity, mirroring the overall landscape for deals in the U.S. Private equity firms have had fewer realizations, with the number of exits—or sales of companies owned by the firms—falling by 46% in the third quarter from the prior-year period.
In the U.S., there have been 31 management-consulting M&A deals by private equity firms totaling $100 million this year through Nov. 2, compared with 37 such transactions across $1 billion the prior-year period, according to research firm Dealogic.
The Guidehouse deal comes as the pace of consulting revenue growth slows for many providers of these services. U.S. consulting is expected to grow by 8% to $94 billion this year, down from 10.5% last year and from 11.1% in 2021, according to consulting-industry data provider Source Global Research. Globally, the consulting market is projected to expand by 8% this year to about $250 billion, following a 10.7% increase in 2022, Source Global said.
“It’s a very big market where there’s real runway growth,” said Joseph Robbins, a Partner at Bain.
Originally announced November 6th, 2023
