The case for listed consultancies – is it time to buy?

The world of consulting is known for its juggernauts. Strategy houses such as McKinsey, Bain and Boston Consulting Group, together with the ‘Big Four’ professional services firms, grab most of the headlines – and most of the work. All these companies have shunned the public markets in favour of partnership models, however, meaning investors are largely shut out.

Several smaller consultancies have chosen to list in London, though, and are attracting attention. This summer, former Aim company Alpha Financial Markets Consulting was bought by private investment group Bridgepoint (BPT) at a 50 per cent premium. The year before, business consultancies made up 44 per cent of mid-market private equity deals.

The situation is more mixed on the stock exchange itself. Recent FTSE 250 entrant XPS Pensions (XPS) is the stand-out player, with shares up 53 per cent versus a year ago. However, shares in boutique management consultancy Elixirr (ELIX), which has consistently achieved double-digit revenue and profit growth, are proving more sluggish, with a gain of 15 per cent in the past 12 months. It’s possible, therefore, that some good businesses are going cheap.