The Future of Professional Services Firms
In the professional services industry, technology has accelerated change. Client expectations are evolving quickly, and firms must adapt their operations to support a more digitized business model. More than one-third of professional service firms anticipate 75% or more of their revenue will come from digital within the next three years. Firms are looking to better equip themselves for the future by investing in their people, technology, and data. For example, robotic process automation (RPA) software in the accounting industry has enabled CPAs to work at a higher level and provide more detailed analysis than ever before. RPA software eliminates manual processes that are time-consuming and repetitive. KPMG, one of the Big Four Accounting firms, formed a strategic alliance with Alteryx to accelerate data-driven business transformations. Other professional services firms are expected to follow suit, leveraging data science to improve the quality of work and maximize efficiencies.1 2 3
Insurtech Startups Disrupt the Insurance Market
The insurance distribution sector experienced its fifth straight record year of mergers and acquisitions in 2021, with 798 transactions announced as of January 3, 2022. Private-capital-backed investors made up nearly 75% of transactions. The increase is due in part to the rise of insurtech startups. Insurtech, a business model employing data analytics and informed policy decisions to maximize insurance efficiencies, is a burgeoning industry that represents the broad transition industries are making to integrate data-driven practices in established markets. Investors are eager to get a part of the action—investing over $6 billion into Insurtech companies during 2021, surpassing 2020’s total by 32 percent. Insurtech startup Breeze recently raised a Series A round led by Northwestern Mutual Future Ventures, and entrepreneur-focused Next Insurance raised $250 million. Cyber insurance provider Coalition raised $380 million in two separate funding rounds this year. This trend of investor interest is expected to continue into 2022 as Insurtech companies become more mainstream. 4
SMEs Emerge to Erode Amazon’s Market Share
Amazon has grown from a small startup to a multi-billion-dollar company that employs hundreds of thousands of U.S workers, second only to Walmart in the last two decades. The tremendous reach and influence the company wields has crowded out smaller competitors and prevented competition in the past. However, retail and e-commerce start-ups have begun to challenge Amazon’s dominance in recent months. Innovative startups such as ShopIn.NYC, which consolidates smaller retailers’ inventory into one site, has enabled small businesses to compete with Amazon’s product offering and delivery timing. Facebook launched Facebook Shops to help mom-and-pop stores sell on their platform. Heydey, an Amazon competitor, based in San Francisco, raised $555 million in a Series C offering this quarter. Other software companies such as Shopify, which provides the digital infrastructure for small businesses to create online shops, have reduced the barriers to entry for new market entrants and enabled small firms to transition to e-commerce. In total, e-commerce marketplace startups have raised $2.3 billion in venture capital funding. E-commerce sales are expected to reach $6.54 trillion in 2022—a record-setting amount for the industry.5 6 7
Investments in Waste Management Startups are Piling Up
In sectors from agriculture to real estate, startup companies are taking innovative approaches to treat waste management. While currently a small space in terms of total venture funding, investors believe there is room for considerable growth. Companies with business models tied to animal waste have raised substantial funding during 2021. Upward Farms, which focuses on farming using fish manure to fertilize plants, has raised $142 million. N2 Applied develops technology for farmers to produce their fertilizer—and has raised $40 million to date. Publicly traded company Waste Management saw its recycling business increase revenue by 60% from the prior year, driven by an increase in the value of recovered materials. It seems likely that the waste management industry will continue to expand as processes become more efficient.8 9
Largest Transactions Closed
- Covanta Holding Corporation
- EQT Partners AB
- Moon Valley Nursery, Inc.
- Stonecourt Capital LP
- GP Strategies Corporation
- Learning Technologies Group plc
- PSC Metals INC.
- SA Recycling LLC
- Sard Verbinnen & Co., LLC
- Finsbury Glover Hering Corporation
- Media Link, LLC.
- United Talent Agency, LLC
Other Financial Buyer Transactions Closed
- Fort Dearborn Company
- Clayton, Dubilier & Rice, LLC
- Clarion Safety Systems, LLC
- CNL Strategic Capital Management, LLC
- Trinity Partners, LLC
Other Strategic Buyer Transactions Closed
- Coleman Research Group, Inc.
- VisasQ Inc.
- Community Tax, LLC
- NextPoint Financial, Inc.
- Lucas Associates, Inc.
- Korn Ferry
- EnCompass Education Solutions, Inc.
- LifeSpeak Inc.
- Ravix Group, Inc.
- Kingsway America, Inc.
This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.
EBIT - Earnings Before Interest and Taxes