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AI: Transforming Business

Management Consultancies vs Marketing HoldcosMedia Buying ConsolidationImpact of GDPROur HealthTech Proposition

ISSUE 68

THE BULLETIN

ALSO IN THIS ISSUE

Leading adviser on M&A and fundraisingto the global marketing, technologyand healthcare sectors

Dentsu109

Publicis59

Omnicon29

WPP133

IPG24

IN THIS ISSUE...

ABOUT RESULTS

2

OUR LATEST DEALS

3

Accenture36

Deloitte24

PwC9

EY5

IBM54-5

MANAGEMENT CONSULTANCIES VS MARKETING HOLDCOS

AI: TRANSFORMING BUSINESS

6-7

M&A:MARCOMS

8

M&A: MEDIA BUYING

9

INDIAN BUYERS INTO EUROPE

10

MID-MARKET US M&A

11

GDPR: A DRIVER OF CYBER M&A

12

DRIVING VALUE FROM HEALTHCARE DATA

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OUR HEALTHTECH PROPOSITION

14

OUR QUARTERLY REPORTS AND MEET THE TEAM

15

ABOUT RESULTS

YEARS OFRi DEALS

50PEOPLE

250+ YEARS EXPERIENCE

10NATIONALITIES

3SECTORS

3OFFICES

TOTAL DEALS

1,000 BUYERS & INVESTORS

DEALS INPAST 2 YEARS

REFERENCEABLE

25+25

250+

100%

2

www.resultsig.com

20+

3

www.resultsig.com

OUR LATEST DEALS

has been acquired for £84m by

has been acquired byhas been acquired by

has been acquired byhas been acquired byhas acquired

has signed a definitive merger agreement, valuing inVentiv at $4.6bn with a joint enterprise

value of $7.4bn

has been acquired byhas signed a definitive agreement to acquire the Swords, Dublin

manufacturing site from

has secured an investment from

has acquiredhas been acquired by

It has been a busy year at Results having completed 12 deals globally across all of our sectors since October 2016

MANAGEMENT CONSULTANCIES VS. HOLDING COMPANIES – THE FULL STORYTo date only three of the global consultancies have established marketing specific divisions and these are all relatively new developments with IBM creating IX in 2014 and Accenture and Deloitte launching Interactive and Digital arms in 2009 and 2012 respectively.

In terms of scale, the revenues/ staffing

numbers do not yet compare with that of the

holding companies (holdcos). Nevertheless,

they’re performing well though when you

look at growth (Accenture 50+ per cent) and

revenue per head is higher than the average

holdco. The annual Cannes event this year

saw perhaps the greatest coverage of the

consultancies with their flags firmly flying at

the event. Also, Ad Age has twice crowned

Accenture as the largest digital network.

In this article, we examine the acquisition

volumes, strategies, cultural differences and

what’s next in this hotly debated space.

Accenture leads the way followed by Deloitte

in terms of number of deals across the

marketing and digital services sector.

IBM did four deals in rapid succession in

2016 but since then they have largely been

quiet in the space.

The holdcos are proactively engaged in

building out their service provision to remain

competitive in the face of new entrants to the

market.

It’s worth noting WPP and Dentsu have

each made more acquisitions than all of the

4

consultancies combined. Along with IBM iX,

Accenture Interactive and Deloitte Digital

are the only consultancies that have actively

invested in creative services.

Consultancies that have made no or limited

moves through M&A are the strategic

consultancies, such as Bain, who operate

at a different end of the spectrum doing

pure strategic consultancy as opposed to IT

transformation and IT consulting.

McKinsey has only completed one deal in

the space but already has a developer team

of over 1,000, so they already have some of

the key capabilities in house. Others, such

as PwC, will pitch for work in the space

but prefer to partner on UX design, data,

creative partners & media or tech.

www.resultsig.com

Company Staff Revenue Revenue/Emp $’000s

Accenture interactive 13K $4.4bn 339 / head

IBM iX 10K $3.0bn 300 / head

Deloitte Digital 7K $1.2bn 171 / head

WPP 133K $18.3bn 138 / head

Omnicom 79K $15.4bn 196 / head

Publicis 78K $10.6bn 137 / head

IPG 50K $7.8bn 158 / headPlease note figures have been rounded

90

80

70

60

50

40

30

20

10

0

IBM

Revenue ($bn)

DeloitteAccenture

IBM iXDeloitteDigital

AccentureInteractive

OmniconWPP

Publicis

Accenture36

Deloitte24

PwC9

EY5

IBM5

Dentsu109

Publicis59

Omnicon29

WPP133

IPG24

Financial comparisons

Whilst the marketing specific divisions are not

of the scale of the global holding companies

of WPP, Omnicom and Publicis they do form

part of significantly larger businesses which

eclipse the size of the holding companies.

Whilst there is a lot of similarity in shape and

make-up of the holding companies, the likes of

Accenture, Deloitte and IBM are all very different

businesses with different origins ranging from

public auditors, technology consultancy to

hardware and technology IT services.

Acquisition volumes (2014-June 2017)

MANAGEMENT CONSULTANCIES VS. HOLDING COMPANIES – THE FULL STORY

www.resultsig.com

Mark CoxE [email protected]

5

Total deals by geographic area – January 2014 to June 2017

The greater proportion of deals completed by the holding groups are in emerging markets, whereas the consultancies tend to buy new capabilities to broaden their offer for mature markets. Also, they are often looking to build on those skills organically, rather than through acquisition. Anecdotally too it would appear that with acquisitions like Fjord, Accenture expanded that brand rather than buying in competing businesses, which is traditionally how the holdcos have operated.

Deep pockets

Accenture has talked about a US $1 billion pot set aside for acquisitions this year, whereas WPP (for example) spends about US $400 million per annum on acquisitions (per annual accounts). Average deal size for both WPP and Accenture in 2015 and 2016 is remarkably similar at around US $25 million which indicates that they are indeed buying similar size businesses and that in our industry, businesses ripe for sale tend to be in that ballpark value.

Cultural differences

The main cultural difference between the consultancies and the holdcos is that the former don’t tend to buy competing businesses, whereas the holdcos have few qualms in doing so.

We have an Accenture Interactive team that has deep tentacles reaching into the technology capabilities of Accenture to shepherd creative talent and that’s critical. We are not just another player in this ecosystem. We didn’t buy Karmarama to take their earnings and distribute them to shareholders — it’s about creating synergy for clients.

Brian Whipple, Senior Managing Director of Accenture Interactive

In terms of business structure and deal structures, the consultancies are vertical, while the holdcos are company structure organised.

There has been a lot of talk recently of holding company reorganisations to break down the

silos when they go to market to offer clients the best possible proposition. Dentsu perhaps leading the way on this because of their one P&L by geography approach which fosters a more collaborative culture.

On deals, management consultancies are less likely to do long earnouts whereas the holding companies have rarely varied from the three-five year earnout structure for acquisitions. The consultancies are also more likely to focus on revenue as they are buying capabilities to plug into their network rather than for profits.

I have one global management team and we go to market as Accenture Interactive. It may be that Fjord offers service design and Karmarama is in a similar brand space, but the Accenture Interactive team all has 100% aligned incentives, without separate founder incentives at all.

Brian Whipple, Senior Managing Director of Accenture Interactive

What’s next?

Although the holding company bosses have been playing down the threat from the

consultancies, these players will go after

the same clients and are indeed going after

similar acquisition targets.

The consultancies are undoubtedly in

a good position to continue to leverage

capabilities in the space given they typically

have strong relationships with the C-Level.

The relationships they have with Chief

Information Officers and Chief Financial

Officers are considered prized possessions.

We expect to see further encroachment into

the space by consultancies as they continue

to show strong levels of intent, continue to

adapt their offer and also deliver results.

Success in this space is going to be

contingent on being able to bring the right

mix of talent, innovation and experience

needed to deliver what are increasingly

complex solutions and deliver this in a

simplistic way for clients.

www.resultsig.com

0

Management Consultancies Marcoms Networks

20 40

Geographic Targets

60 80 100 120 140 160 180

Other mature markets

Emerging markets

Europe

USA

6

AI: TRANSFORMING BUSINESS – PANEL DISCUSSION

the field to get the benefit of their expertise

and experiences in bringing AI into the

business world:

• Chris Mairs, Founding Chairman

of Magic Pony – one of Europe’s most

successful machine learning software

companies. The company was sold to

Twitter for a reported $150 million last

year.

• Mark Davies, VP Biomedical

Informatics at BenevolentAI, one of the

largest private AI companies in Europe.

Mark oversees the company’s use of AI to

enhance and accelerate biomedical

scientific research.

• Simon Kelly, former Chief Sales

OfficerofBabylonHealth, a healthcare

company using AI to transform the

consumer healthcare experience.

The discussion was wide-ranging but we

were left with several important takeaways:

Data, data, data

The value of unique data sets in the

successful application of AI and ML is

at least as important, possibly more so,

than the strength of the algorithms. The

starting point for any enterprise looking to

put in place an AI strategy, should be to

look at the unique data sets it can access.

The importance of big data in AI brings

its own challenges – deep learning needs

almost unimaginable quantities of data, but

that data first needs to be cleansed and

“labelled”. Without labelling you cannot train

a machine with a new task. The human

brain is very good at labelling and, for now,

learning how to label accurately without

extensive human intervention is still a major

challenge for any AI platform.

www.resultsig.com

It feels like in 2017 we have reached a

tipping point in the adoption of artificial

intelligence (AI) and machine learning (ML).

In the same way that the advent of the

smartphone enabled new entrants such as

Uber, Airbnb and Amazon to disrupt their

established and traditional competitors, AI is

poised to cause even greater disruption to

the status quo. Whether you’re a start-up or

an established market leader, AI needs to be

at the heart of what you’re doing. But with

all the noise and confusion in the market,

how do start-ups and more established

businesses alike ensure they don’t go down

the wrong path or get left behind?

At our breakfast briefing AI: Transforming

Business, Results turned to three leaders in

‘We are going to see AI being most disruptive in the healthcare and finance industries.’ - Simon Kelly @Babylon Health

“We’re moving from a mobile-first to an AI-first world.” Sundar Pichai, Google CEO, May 2017

7

AI: TRANSFORMING BUSINESS – PANEL DISCUSSIONMore data will be created this year than in

the previous 5,000 years of human history

as the number of devices that generate

and collect data proliferate. Unlocking the

true potential of that data to develop AI

applications will depend largely upon our

ability to cleanse and label it at scale.

Use the major AI platforms

Google, IBM, Microsoft and Amazon are

relentlessly investing to offer the best AI

framework. Very few start-ups are looking to

take on these players with fundamental AI

head-on – the deep pockets of the largest

tech players will inevitably prove too strong

for even the most well-funded start-up.

Rather, the most successful AI start-ups tend

to be using these established frameworks

to build very specific applications to

solve problems across industries such as

healthcare, insurance, banking or shipping.

Established businesses looking to build

AI functionality should follow a similar

approach, using an established framework

with their proprietary data to develop

solutions at the application layer.

Skills shortages and retention

Skills shortages in data science are well

documented, but in recent years the UK

has punched above its weight in terms

of creating world leaders in AI and ML.

DeepMind, Dark Blue Labs, Vision Factory

and Magic Pony are all great examples of

the talent being developed in the UK, and

their success has in turn helped create a

strong pool of talent. The US and specifically

the West Coast is the largest source of

talent, but retention in the UK, whilst not

easy, does tend to compare favourably with

the West Coast. Thinking creatively about

culture, employment strategies and what

skills can be developed and trained in-house

are all key.

M&A more rational than it looks

There have been a lot of very high-profile

acquisitions in the AI sector, attracting high

valuations. Whilst media reports often

attach a “price per engineer” to deals, the

reality is valuation is generally driven by

other factors. High valuations are typically

much more likely to be driven by (i) large

patent portfolios and/or (ii) the target having

developed an AI-based solution which

fixes a major problem or opens up a new

revenue stream for the buyer. In many of

the most high-profile deals, the buyer and

seller have been commercial partners long

before entering M&A discussions, ensuring

the buyer’s business case is proven and the

transaction partially de-risked.

The shift to generalised AI

Whilst discussion of AI tends to focus on

self-driving cars and robots, many of the

most commercially successful deployments

of AI to date have been in the application of

very specialised machine-learning solutions

to particular industry problems, ranging from

plastic piping and fish-farming, to finance

and healthcare.

Looking forwards, the next step is

generalised AI, where we take artificial

intelligence from narrow, domain-specific

applications (like preparing an insurance

quote) to the sort of general intelligence

which humans can draw on to help them

tackle new problems. The consensus of the

panel was that AI will achieve human parity

by 2030-2050, with quantum computing

playing a significant part in making that

possible.

What became clear throughout the debate

is that the potential of AI to transform every

aspect of business and our day-to-day lives

goes well beyond the advent of the internet

or the smartphone. Success, or otherwise,

of businesses will be defined by how they

integrate AI into their core operations, and

the starting point for approaching that is with

the data they either own or can access. The

impact of AI is on the verge of a step-change

and no business can afford to be left behind.

Julie LangleyE [email protected]

www.resultsig.com

‘90% of all online data has been created in the last few years.’ -Mark Davies@benevolent_ai

‘You cannot put your head in the sand and say we will not be doing AI, the train has already left the station.’ -Chris Mairs Magic Pony

from their screen and cut through a highly fragmented marcoms landscape.

That’s creating more demand for agencies

able to offer these more in-depth customer

experiences, on top of the continuing

need for buyers to reinforce their digital

credentials.

The US continued to be the most active

region for deals with 171 completed in H1

and 78 completed in APAC.

European based acquirers were more active

with 128 deals this year compared to 106

deals during the first half of 2016, including

acquirers such as Serviceplan, Havas and

Publicis.

It’s unclear if Brexit uncertainty is causing

fewer international buyers to look to the

UK, but other hubs like Paris and Berlin are

certainly trying to attract a larger slice of the

marketing services and technology pie and

this could be reflected in deal geographies.

M&A: MARCOMS DEALS IN H1

Dentsu Group has been the most active network for M&A deals within marketing communications during the second quarter of 2017, against a relatively flat global backdrop. 438 deals have been completed during the first half of the year in the Marcoms space, with 219 conducted during the second quarter (the same number as during Q1). This compares to 506 deals in the first half of 2016.

The most active acquirer was Dentsu with 16 transactions (12 in Q2 and 4 in Q1).

Accenture was also busy with six deals completed in H1 (five alone in Q2), including the mobile design and development business Intrepid and German digital shop SinnerSchrader in February.

Digital agencies still rule the roost for overall deal volumes. Full service digital deals continued to be the largest sector with 14 per cent of deals taking place during H1

(60 deals), as the holding groups seek a combination of shoring up their offer against new entrants, keeping up with the pace of technology developments and developing new markets. This was followed by integrated with 45 deals and events and experiential at 35 deals including agencies such as MayNineteen, Wasabi Atelier Experiential, Playnetwork and FullSense.

Indeed, interest in events and experiential is greater than we’ve seen for years. Brands are increasingly trying to offer the best customer experiences as they try to target younger consumers, drag people away

Geographical Split of Targets (H1 2017)

Deal Type (H1 2017)

Monthly Deal Volume (H1 2017)12

Quarterly Deal Volume (H1 2017)12

Top Marcoms Buyers (H1 2017)

(H1 2017) Top PR Buyers

Top AdTech/MarTech Buyers (H1 2017)

Top Marcoms Sectors (H1 2017)

Top AdTech/MarTech Sectors(H1 2017)

$ Disclosed Deal Value (H1 2017)

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Volume of Deals (H1 2017)


Deal Type (H1 2017)









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James KesnerE [email protected]

www.resultsig.com

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entrants, who typically pay the highest

values, are looking for one-stop, multi-

channel solutions.

2. Geographic scale – as big global

brands shift their revenues away from

traditional to digital spending, companies

which offer multi-market, consistent and

localised campaign execution are valuable –

this also implies greater scale.

3. Profitability– more so now than

ever, profitability is a factor. With players

like The Trade Desk and Criteo proving

you can execute the media buy, build

innovative technology and achieve scale

whilst generating strong margins, a new

benchmark has been set.

The number of profitable players in the

sector are few and far between and

therefore command premium valuations.

4. SustainableGrowth–growing at 100

per cent p.a. is a huge achievement, but to

get rewarded for that growth, you need to

be able to prove its sustainability – proving a

huge addressable market, underpinned by a

solid pipeline coming from sticky, long-term

customer relationships is essential.

5. Companies that solve a critical

problemfortheiracquirer– reinvigorating

a declining core revenue, offering a

strategic move into a new sector, new

key geographies to name a few, drive the

highest prices – it’s never too early to think

about who might pay the highest price for

your business and identify the areas of

strategic value you can bring them.

Mark WilliamsE [email protected]

www.resultsig.com www.resultsig.com

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WHAT IS DRIVING CONSOLIDATION AND VALUE DIFFERENTIAL IN MEDIA BUYING?Media buying is a sector under continuous consolidation. Media buying agencies have long been the targets for consolidation by the large marketing groups competing with each other to amass the largest amount of buying power for both brands and publishers. Independent media agencies offering any scale (particularly those with digital and programmatic skill) are therefore scarce and valuable assets.

The growth and adoption of programmatic

digital media buying has given rise to the

birth of hundreds of new start-ups every

year promising innovation in the space –

optimising better, more automated analytics,

and more efficient media buying. The number

of new companies being founded each year

has caused fragmentation in the market and

an invigorated M&A environment – buyers

have a lot of acquisition options now when it

comes to acquiring media power.

Speaking of buyers - it’s no longer the

large marketing groups who are acquiring

now. Telco’s publishers, broadcasters, data

aggregators, software vendors, Chinese

industrial magnates and other categories

of buyer are entering the sector through

acquisition. Valuations are polarised with

some deals with multiples ranging from 1x

(Sizmek acquiring Rocketfuel), 3x (SingTel

acquiring Turn) through to 6x revenue and

above (Altice acquiring Teads).

But what really drives this value differential?

Scale of media revenue is a driver but here are

five others underpinning consolidation right now:

1. Multi/Omni-channelcapability–

Display, search, mobile, video

(programmatic or not) – new market

The Indian corporate sector has evolved rapidly over the years since the economy opened up to foreign direct investment (FDI). Until the turn of the century, the news of Indian companies acquiring American-European entities was very rare. However, this scenario has taken a U-turn and nowadays, news of Indian companies acquiring foreign businesses is more common than the other way round.

India now stands as one of the global

players and its economy, which is the world’s

fourth largest, is buoyant and poised to

outstrip China in terms of GDP growth. This

coupled with favourable government policies

including allowing local companies to merge

with overseas firms and easing rules to help

home-grown businesses restructure their

expanding global operations, has led to a

spurt in international M&A activity.

So what are the business drivers that

are propelling the foreign flow? “Indian

companies have realised the competitive

advantage of having large operations,” says

Rajiv Memani (Director EY), and “have come

out of the pain, focusing on productivity and

profitability and are cash-rich. The big boost

has come with financial reforms and a strong

rupee,” says Ajay Khanna (CEO, Indian

Brand Equity Fund).

Initially, Indian international corporate

investment was centred in Silicon Valley,

with the IT majors like Infosys, Wipro and

TCS leading the pack on the back of BPO

and software services. But for the past

decade, Europe and the UK seem to have

become the preferred destination for Indian

companies with a number of acquisitions

across a range of sectors. Indeed, India has

become the third largest source of FDI in the

UK with investments increasing by 65 per

cent in 2015 leading to over 9,000 new and

safeguarded jobs.

In recent years, the European IT and digital

services sector has really come into its

own, including as a target for Indian buyers

and in many respects this was triggered by

Infosys’ £218 million purchase of Lodestone

Management Consultants (Swiss-based

provider of IT consulting services). Indeed

since 2015 alone, there have been a number

of acquisitions:

• Mindtree acquired Bluefin (UK-based

SAP implementation and integration

services provider)

• Tech Mahindra purchased The Bio

Agency (UK-based provider of digital

strategy, service design and eCommerce

solutions) and Target Group (UK-based

provider of financial software)

• ZenSar Technologies acquired Foolproof

(UK-based UX agency)

• Wipro bought Designit (Denmark-based

provider of strategic design, user

experience and interaction design

services)

Commenting on the trend, deal tracking firm

Mergermarket’s global head of technology,

Pamela Barbaglia said: “EU targets help

Indian companies enhance their R&D, sales

and after-sales capabilities and also help to

reduce dependency on the US.” This last

prophecy is quite prescient since the Trump

administration has now resolved to reduce

H1-B visas for Indian professionals, which

were the lifeblood of Indian IT companies in

the USA. Knowledgefaber’s CEO Amit Goel

also explains: “Europe is really attractive

from a market standpoint as while the US

accounts for 41.9 per cent of the world

market, Europe accounts for 31.6 per cent.”

Current market conditions in India are

strong, and with a wide range of buyers

keen to accelerate growth and expand their

overseas operations particularly in Europe

and the UK, we would expect this ongoing

momentum shift to continue.

Indian M&A in Europe continues to gather momentum

INDIAN BUYERS INTO EUROPE

Sunil GuptaE [email protected]

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November 2016 marked the beginning of a period of uncertainty for public and private markets around the world. Among Donald Trump’s heated pre-election topics were immigration, tax and antitrust reform. However, despite continued uncertainty amongst all three, US markets have returned consistent gains and since November 8, 2016, the S&P 500, Nasdaq Composite and Dow Jones Industrial Average have risen 14 per cent, 20 per cent and 16 per cent respectively.

This political and economic climate is likely

to have three effects on mid-market M&A

transactions: (i) an increase in transaction

volume following a nine month bull market;

(ii) a move towards lower-profile deals that

will stay below the Committee on Foreign

Investment’s (CFIUS) radar and; (iii) an

increase in US acquisition targets by foreign

companies as a defensive play against

uncertainty around H-1B visas (allows US

employers to employ foreign workers in

specialty occupations).

Some of the President’s most vocal

economic rhetoric has been “America

First”, and that as a country the US should

“buy American, hire American.” Through

the CFIUS the President may prohibit

any merger, acquisition or takeover of a

US business by a foreign person. The

immediate question is what impact will

this have on foreign acquisitions of US

companies? While it is too early to tell,

acquirers will probably avoid large cross-

border transactions that require regulatory

and antitrust approval as deals of this size

could take up to 12 months or longer to

consummate and therefore run the risk

of dragging into less favourable market

conditions.

Increased scrutiny and employer

requirements for H-1B visas will put

pressure on foreign firms in select industries

to secure US talent. Specifically, US

Citizenship and Immigration Services

(USCIS) included computer programmer

positions as potentially no longer eligible

for specialty occupation designation and an

H-1B visa. Indian tech firms command the

highest percentage of the roughly 85,000

temporary H-1B visas issued each year,

accounting for 65-70 per cent of those visas

annually. On top of this, there is legislation in

the works to increase the minimum annual

wage of H-1B visa holders to US $130,000,

which is more than double the current US

$60,000 wage with the theory behind this

increase being to make it more difficult

to replace American workers with less

expensive outsourced talent. Indeed, some

of the largest Indian IT firms have recently

made US acquisitions to hedge against

visa uncertainty with notable transactions

including Wipro’s acquisition of cloud-based

business enterprise service provider Appirio

for US $500 million and Tech Mahindra’s

acquisition of the healthcare IT consulting

firm CJS for US $110 million.

Of course, it is difficult to predict exactly how

the political climate will shift and impact the

equity and M&A markets in the near future.

Nevertheless, with off-shore companies

increasingly relying on non-immigrant visas

to source their US-based labour combined

with an aversion to US regulatory scrutiny

there should be increased levels of M&A

activity in the mid-market both at home and

overseas. This will make for a strong second

half of 2017 for Results’ clients and relevant

buyers alike.

Maurice WatkinsE [email protected]

www.resultsig.com

The political and economic climate in the US is good news for mid-market M&A

MID-MARKET M&A IN THE US

Maurice WatkinsE [email protected]

11


www.resultsig.com

Sherif HegazyE [email protected]

Strong deal activity in the UK cybersecurity consultancy market

Unsurprisingly M&A markets in the cybersecurity consultancy market have remained buoyant with a series of transactions over the last few months.

Notable examples include F-Secure’s acquisition of penetration testing provider Digital Assurance, (F-Secure was advised by Results International), Claranet’s acquisition of Sec-1 and Altran’s acquisition of Information Risk Management.

The diversity of buyer groups from security software vendors to managed services providers and consultancies reflects the growing strategic interest in the space from a broad universe of counterparties.

Looking ahead, we expect M&A deal activities in the space to remain strong and given the scarcity of targets of genuine scale in the cyber consultancy market, it will certainly be interesting to see which companies on the list will be snapped up next.

Countdown for GDPR – are you prepared?

Next year, the General Data Protection Regulation (GDPR) will introduce the biggest changes to data protection in Europe in two decades, with companies facing fines of up to 4 per cent of their annual turnover if their data is hacked without having adequate measures in place.

Companies are racing to tighten up their security defences before this new regulation becomes effective. Ahead of this, the Information Commissioner’s Office (ICO) has released a series of recommendations to help companies ensure they are compliant with amongst others, the use of penetration testing and regular vulnerability assessments to continually assess applications and critical infrastructures for security exposures.

Many other global regulatory bodies (e.g. New York State Department of Financial Services) have also since followed suit and are increasingly demanding annual penetration testing as part of their compliance requirements.

Huge demand for penetration testing services

Reflecting this growing regulatory shift, there

has been a significant uptick in spending on security testing services with increasing

adoption not just in highly targeted sectors

(e.g. government, financial services and

defence) but across a multitude of other

verticals as well.

A recent report conducted by Markets and

Markets estimated that spending in the global

penetration testing market will surpass US

$1.7 billion by 2021, at a CAGR of 23.7 per

cent over the forecast period - the fastest

growing segment in the global information

security market.

That said, there remains a significant gap in

the market as demand for security testing

services far outstrips the supply of talented

ethical hackers.

Cyber consultancies with sophisticated

technical capabilities, talent and highly

differentiated offerings are well positioned to

reap the awards of an ever-evolving threat

landscape.

These businesses also remain highly attractive

acquisition targets for companies looking to

bolster their security services capabilities in the

areas of penetration testing or for those who

are looking to enter a rapidly growing market.

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www.resultsig.com


The current state of the art in

artificial intelligence (AI) lags

far behind the standard tropes

of science fiction. Most science

fictional representation of AI is

based on ‘general’ AI, producing

a convincing emulation of

human personality, insight and

intelligence with a propensity to

then extrapolate that to a mad

tech-based demagoguery.

Fortunately reality is still a little different

with most AI being ‘narrow’, restricted to

making our lives easier via the application

of machine learning and Natural Language

Processing (NLP) to interpret and generate

value from big data sets.

IBM’s Watson and Google’s DeepMind

are the most well-known embodiments

of this vanguard defeating human chess

grand masters and proponents of ‘Go’ and

‘Jeopardy’. Watson has been applied to

a number of healthcare related problems

including diagnosis of human cancer

patients but to date has not been greatly

successful with MD Anderson terminating

their collaboration with IBM when Watson

failed to achieve a 90 per cent or better

diagnosis rate in cases of suspected

Leukaemia. The whole sorry saga has cost

MD Anderson US $62 million to date.

Experts have suggested that IBM’s Watson

has fallen short on two counts: the quality

of the data going into it (rubbish in, rubbish

out); and its ability to work with unstructured

data via NLP. Unstructured data is just what

the name suggests, text based speech,

such as this article, commonly found in

physicians notes, research papers, patents

and commentaries.

Other companies are notably achieving

early commercial success by focussing

on improving this state of affairs in one or

www.resultsig.com

13

DRIVING VALUE FROM UNSTRUCTURED DATA IN HEALTHCARE

more ways. Linguamatics in Cambridge,

UK have enjoyed strong success in both

pharma discovery and healthcare markets

by delivering a text/data mining NLP and

machine learning derived platform. Babylon

Health, a UK business, is focussed on

‘teaching’ its AI how to accurately diagnose

patients for GPs by recording thousands

of man hours of GP diagnoses across

thousands of GP/patient interactions. Thus

taking the approach of quality data inputs

and sheer scale enabling their AI to be

successful in reducing GP workload by

screening the more routine cases out of their

caseload.

FlatIron, based in the eponymous building

in New York and funded by Roche

Pharmaceuticals among others, is focussed

on gaining insights in oncology patients from

using AI to trawl through patient electronic

health records (EHRs) to gain insights from

the sort of unstructured data that resides in

doctor’s notes as well as the more structured

data from lab reports. Trinetix, based out

of Boston, is applying a similar approach

but going broader trying to annex data from

as many EHRs as it can gain agreement

from separate health groups to access. It is

then allowing those groups who collaborate

with them free access to the resultant data

whilst selling access to the wider data to

the pharmaceutical industry as a patient

recruitment tool for clinical trials.

Benevolent AI, based in London, is focussed

on drug discovery, using its own version

of AI to access patent data and research

publications from public and private sources

to find new disease associations for

known drug targets in order to re-purpose

established drugs into new indications, or

discovering novel drugs for established drug

targets. This area is viewed as potentially

very lucrative with investors keen to

commit significant funds to support it. Both

Benevolent and FlatIron are ‘unicorns’ with

valuations exceeding US $1 billion despite

few if any revenues.

All are using AI to churn through terabytes

of unstructured data which would previously

have taken many human lifetimes to achieve

in order to provide data associations and

insights that would have been the sole

preserve of human minds. Only time will tell

how successful they will be, however, there

are no shortage of investors betting on them

being so.

Martin GouldstoneE [email protected]

OUR HEALTHTECH PROPOSITIONWe caught up with two of our partners Martin Gouldstone and Chris Lewis to discuss our unique HealthTech proposition and some of the key drivers of M&A in the space

Martin’s background spans a vast trajectory, originally starting out as a scientist in genetics, he worked on DNA fingerprinting when it was first discovered. He then joined the pharma industry in about 1990 and has had a lot of different roles in the healthcare sector from selling drugs to developing drugs and running M&A for Quintiles in Europe. Martin joined Results at the beginning of 2017, after spending over 3 years leading

the life sciences sector at BDO.

“I was attracted to the great depth of industry knowledge and expertise at Results”

14

www.resultsig.com

Chris LewisPartner

Martin GouldstonePartner

What do you think makes Results’ HealthTech proposition so compelling?

Chris and I come to HealthTech with slightly different perspectives and between us we have worked on deals across the entire ecosystem. I am coming from a life sciences patient disease modification angle and can therefore provide deep sector expertise whereas Chris approaches it from an in-depth technology angle. Indeed, the deals that we have collectively worked on in the space are a good representation of this, namely CRF Health and PhlexGlobal which are both at the services end but using technology for clinical development and Zinc Ahead and iSoft which are suppliers of software applications to the wider life sciences and healthcare community.

Our different perspectives enable us to provide a unique proposition to our clients but it is also important to recognise that whilst Martin and I are spearheading the HealthTech practice at Results, this is not just about Martin and I. This is about the whole firm and the fact that we have more than 50 people globally now, many of whom are focused on Healthcare or Technology and the intersection between them. This gives us the breadth of experience, exposure and expertise to add unrivalled value to our clients.

Yes I would completely agree with that and this global reach combined with real sector and technology expertise gives us a deep rooted knowledge of what is a very global and broad buyer universe ranging from contract research organisations (CROs) in the pharmaceutical sector all the way through to large scale enterprise software businesses like Oracle or IBM. Collectively as a firm, we understand the buyers, their motivations, their strategies and how they operate compared to groups that might just focus on technology, healthcare or life sciences in isolation.

What are the key drivers in HealthTech from an M&A perspective?

CL: From a technology perspective, many of the drivers in life sciences and healthcare are the same as they are in other verticals but with some sector-specific issues on top. The most pertinent drivers include increasing automation to drive efficiencies, improved patient outcomes and regulatory compliance and security which is incredibly important when you start to think about patient data in healthcare. It is of course, about utilising machine learning and other big data techniques to get real value out of this data.

Completely agree. Innovation in big pharma is a real problem. If you can use machine learning and other Artificial Intelligence (AI) techniques to identify or trawl through very large data sets, in patents and in published papers, to identify new drug targets and approaches for cancers

in particular or Alzheimer’s disease that is tremendously valuable. What you have seen is large organisations like Apple or Facebook progressively owning healthcare data but without the means or the tools to analyse that data it remains pretty meaningless. Therefore, companies that can do this will be very sought after from an M&A perspective.

I think the other point is that if you

consider the advantage an organisation gains

from employing big data analytics to drive

genuine insights – in a clinical trial situation,

the stakes for the blockbuster drug are just

so high that technology and the advancement

in that technology is as fundamental to the

industry as the compounds themselves.

How does the Results HealthTech offer compare?

The sector is quite fragmented in

terms of the offering with pockets here and

there and people that might have done the

odd deal but I think if you are looking at a

concentration of both sets of expertise in one

place, having done the deals we have done,

I would say we are a scarce commodity.

Chris has been working in technology sector investment banking for over 20 years. Over that time, Chris

has worked across a number of horizontals and verticals within technology, across multiple geographies,

in both M&A and fundraising.

“I really like the dynamism of tech and when you add in the healthcare dynamic too it is a very compelling space to work in”

‘The key drivers are automation, efficiency, security and innovation and technology and the advancement in that technology is fundamental to the industry’

‘We bring together years of deep healthcare, life sciences sector and technology expertise and we do this globally’

MEET THE TEAM...

Results International27 Soho Square, London, W1D 3AYT +44 (0)20 7629 7575

Sunil GuptaManaging Partner, South Asia

Mark WilliamsDirector

Anthony HarringtonManaging Director

James KesnerDirector

Mark CoxDirector

Eduardo SteinerPartner, Latin America

Kevin BottomleyPartner

Keith HuntManaging Partner

Julie LangleyPartner

Chris LewisPartner

Maurice WatkinsPartner, USA

Pierre-Georges RoyPartner, USA

Andrew KeffordManaging Partner, APAC & MENA

Authorised and regulated by the Financial Conduct Authority

Chris BeaumontManaging Partner, North Asia

OUR QUARTERLY REPORTS

Imad KablawiRegional Partner, MENA

Please view all these reports on our website: www.resultsig.com/insights or email us to join our mailing list: [email protected]

Chris JonesNon-Executive Chairman

Richard LatnerDirector

David MansfieldNon-Executive Director

Martin GouldstonePartner

www.resultsig.com

15

Kunal KadiwarDirector

Tuesday 10th October 2017 08:30 – 10:30Institute of Contemporary Arts12 Carlton House TerraceLondon SW1Y 5AH

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