Madison Dearborn invests in consultancy Ankura

Madison Dearborn Partners has committed $100m to Ankura Consulting Group as a strategic growth investment.

Madison Dearborn Partners (MDP) has committed $100 million to Ankura Consulting Group, the firm said.

This strategic growth investment will support the expansion of Ankura’s advisory and services capacity that focuses on governance, risk, compliance and restructuring services.

“With MDP’s support, we will continue building leading positions in growing sectors by attracting and retaining the very best talent in our chosen fields, adding to our capabilities through selective transactions and fostering a culture centered on our core values of collaboration, innovation and client service,” Ankura founder and chief executive Roger Carlile said in a statement.

An MDP spokeswoman told Private Equity International that this is not MDP’s first investment in the advisory business space. Recent investments include Kaufman Hall and NFP, she said.

This transaction follows a broader industry trend of private equity firms either investing in or acquiring consultants in order to increase their operational improvement capabilities for portfolio companies.

The trend dates as far back as 2006 and 2007, when valuations and prices were soaring pre-crisis, according to SSA & Company senior advisor Paul de Janosi. He explained that in high valuation and pricing environments, fund managers tend to rely more on consultants to extract value from portfolio companies and achieve desired returns.

Having a consulting group as part of a portfolio is a handy tool for private equity firms. “There’s this idea that you then have consultants inside your portfolio that you’d still pay for but use for other portfolio company,” de Janosi said.

Mid-market firm Sentinel Capital Partners acquired Trinity Consultants in 2007 in a management buyout. Lovell Minnick Partners bought Mercer Advisors in 2008, and Aquiline Capital Partners bought insurance consulting and asset management provider Conning & Co the following year, according to reports. In 2012, CVC Capital Partners bought consultant AlixPartners, which had received investment from Hellman & Friedman six years prior. In October 2014, mid-market firm Quad-C bought advisory firm Vaco. More recently, Carlyle announced in September its investment in PA Consulting Group.

“It’s not enough to be a stronger leader and a good operator yourself as a CEO,” de Janosi told PEI. “You now need to have additional resources inside the company working at the most detailed levels to be able to achieve the next level of value.”

The MDP transaction involved RBC Capital Markets as the exclusive financial advisor and Cole Schotz as legal advisor to Ankura. MDP received legal advising from Kirkland & Ellis.

Chicago-based MDP manages over $21 billion in capital raised through seven funds and has made 13 investments. It invests in a variety of sectors, including financial and transaction services; business and government services; healthcare; basic industries; consumer; and telecom, media and technology services.