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shopping basket consultingThey buy, they buy… Merchant banks, IT companies, auditing firms, all of them want their own strategy consulting firm. An operation that doesn’t come without risk.

March 2008. Oliver Wyman absorbs the management consultancy Hemeria, which has made a name for itself in areas such as operational performance, automobiles and aerospace. Eighty consultants come reinforce the OW’s 260 France-based employees. Hemeria’s founders have made stops at Bossard and Capgemini, but since 2005 Hemeria’s growth has slowed. The time has come to “get closer” to another player, a euphemism for “selling the firm”.

What were the stakes? A new offer and a complementary portfolio of clients, states Oliver Wyman. A chance to take on an international scope, responds Bernard Birchier, then president of Hemeria and to this day a partner at OW. And yet two years down the road, the resulting balance sheet turns out to be rather disappointing. Differences in cultures, questionable positioning… A number of Hemeria consultants have jumped the Oliver Wyman ship.

A few years earlier, OW’s ancestor, Mercer Management Consulting, had integrated Diamond Cluster. There too, the results left something to be desired. In 2006 the Lowendal Group takes over the Masaï cabinet. They create Lowendalmasaï… which has just been acquired by the leader in performance improvement consulting, the Alma Consulting Group. The expected synergies between Lowendal and Masaï struggled to take ship. Despite the new name, the graft didn’t take.

Same sanction for Deloitte, which treated itself to Monitor, on the verge of expiration. A significant number of the latter’s consultants were having none of it. They walked away. Deloitte would have to do without them.

Why do small merchant banks, the big four, consulting firms themselves buy strategy consulting firms?

Clearly, consulting firms have become an attractive proposition. But why?

Above all, for opportunities, says Matthieu Courtecuisse, a cofounder of Sia Partners, which has bought five companies since 2008: “All of our acquisitions involve firms that were in financial difficulty.” The pace of acquisitions has indeed slowed as the market has regained strength. “We’ve always taken over companies that were going through a rough patch, because we could offer them a project, a future, and a return to glory.” An important factor in ensuring a successful marriage.

When Sia Partners buys EDS, in 2006, it allows the new family members to return to pure consulting after a period of time spent under the ownership and guidance of the Hewlett-Packard IT group. A monumental fiasco. Sales are often made in the wrong direction, forcing consultants to leave the world of strategy. “A return to strategy consulting allows them to regain some breathing room, some reflexes, and some autonomy,” says Matthieu Courtecuisse. It is also a way to move into new markets, in terms of both sectors and geography.

In 2012, Sia Partners inherits the four employees of OTC Americas, the New York branch of the OTC Conseil group. The prize? The possibility to face new clients without the baggage that comes with being new to the market. Lastly, to gain expertise. This is Solucom’s main reason for any purchase, states Pascal Imbert, Chairman of the Management Board: “It is truly the quickest and most efficient way to gain new know-how. It was important for us to be able to rapidly assemble skillsets and to create an alchemy between our talents and those of others, for instance in the fields of banking, energy or transportation. It is thanks to merges like this that we have been able to develop.”

As for auditing firms, such as Deloitte and PwC most recently, they no longer hide their ambition of nibbling away market share from the legacy strategy consulting players.

The shoals

Sometimes, it just doesn’t work, admits Pascal Imbert: “In 2007, we moved closer to the Vistali cabinet. We made two mistakes: we did not gain expertise that we didn’t already have, and especially our corporate cultures were too different. Even though the project worked out well financially, even though we were able to take in employees who wound up flourishing here, a lot of value went up in smoke.”

To avoid such waste, Solucom tries to ascertain the recipe for success. Firstly, be very clear on the nature of the project and the motivation of both involved parties. For instance, a small firm that has been struggling to break through the glass ceiling of four or five million euros in revenues will find in a larger player the springboard it needs.

Attention must also be paid to the compatibility of the two corporate cultures. Some differences cannot be smoothed away. Finally, aim for a progressive but steady integration process. “Integration takes six, twelve, maybe even fifteen months, no more,” confirms Pascal Imbert. “We want to avoid periods of uncertainty, while still leaving some time for employees to mourn their old structure, in particular for leaders of the purchased company. In order to do this, they need to quickly be moved into a new dynamic, a new project in which the new teams are involved.”

In the end, nothing is guaranteed. Even when all conditions are met, not all grafts can take, and the main risk remains the possibility of losing consultants, and thereby losing value. But by following these guidelines, Solucom claims to have pulled off some very nice operations, such as the recent one involving Audisoft Oxea, “a success that exceeded our expectations”, according to a pleased Pascal Imbert.

The sinews of war

And so the sinews of war turn out to be retention packages. The ball and chain to keep the workforce in place, and to avoid spending millions of dollars on a name and an empty shell. The deal between PwC and Booz & Company? “A billion dollars, of which two thirds are reserved for very generous four-year retention packages,” whisper well-informed sources.

Four years is long enough to lock in customers and retain partners. As for the consultants, they did not sign up to join an auditing firm. When the buyer does not belong to the inner circle of consulting firms, many of them choose to stay faithful to their first love and seek new employment. At the time of PwC’s purchase of Booz & Company, Cesare R. Mainardi, CEO of Strategy&, expressed his pleasure with “completing PwC’s wide range of consulting services.”

But that is the heart of the problem: too often, consultants have the feeling of giving up their identity when they no longer belong to an actual strategy consulting firm. This notion is further reinforced by the fact that strategy winds up being diluted in the “wide range of consulting services” of the acquiring company. Like an item on a menu, allowing customers to pick and choose according to their needs.

Strategy consultants rarely see themselves in this way, which explains why numerous purchases of consulting firms by auditing or IT firms end in a rush of consultants out the door. Not to mention that directors who sell their firms instantly lose in panache. Those willing to accept a demotion from director to partner among partners are few and far between. As are those willing to give up on the entrepreneurial adventure.

Lisa Melia for 

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