In Part 1 of this series, Jason and I talked about the basics of the PwC and Booz and Co deal, and also some comparisons to the stunted courtships (Booz and AT Kearney in 2010), failed marriages (EDS and AT Kearney back in 2006), bankruptcies (Monitor Group), fire sales (Monitor Group & Deloitte; or Archstone Consulting & The Hackett Group), brain drains, and generally more drama than Sunday night on cable TV – or the Cardinals breaking the hearts of the entire Midwest after leaving three runners stranded on base last night in the top of the seventh.
I (Pierre, that is), have also personally lived through many of these dramas, as have many others on our team. I was at CSC when it acquired Index Group (a disaster). I was at Arthur D. Little when it started entering a death spiral that led to its 2002 bankruptcy (from which it eventually re-emerged). I was at Hackett when it acquired Archstone Consulting and REL Consultancy, and saw many of the ‘interesting’ dynamics of when five different services groups were all doing procurement services work.
Jason was lucky enough to leave Northeast Consulting (an ADL spinout) in 1999 before it was acquired by Nervewire and ultimately by Wipro (deals brought on by .com mania which ended up destroying the DNA of the original firm). Lisa Reisman (see her bio on MetalMiner which completely fails to mention the BearingPoint fiasco) fled on the last (leaking) lifeboat out of Arthur Andersen to KPMG's services spin out (an utter failure of a combination, which faced organ rejection when it "acquired" her supply chain team from Andersen Business Consulting). And Richard Lee, our CFO and leader of our own services arm, actually put a number of deals together for Diamond Technology Partners during the same frothy services time frame. We won't comment on the outcome of those ...
Given our experience living through the front lines of services acquisitions as well as covering them as analysts over the years, we will be writing a PRO piece on what practitioners should look for in a post-M&A environment, especially with services and consulting providers, and a few lessons learned on what has worked in some of the post M&A environments. In the mean time, let’s finish with the coverage of the Booz and PwC deal…
On the Booz side, Booz Allen had always stood out from the Big 6 (now Big 4) and the strategy firms in a somewhat alternative way – it was not quite the Boston brainiac pure-play strategy practices at Bain or BCG (or later Monitor or Parthenon). Rather, it brought enough depth in high-level corporate strategy and combined it with operations capability, and later, IT expertise as well. Booz offered a well-rounded service grab bag and was not as IT dependent as Accenture, Deloitte and others for a firm that was not pure-play strategy at the time. And, it is smaller and more easily acquired than Bain and BCG (and McKinsey obviously).
But, although Booz and Co provides a nice self-contained set of capabilities that transition from business strategy to IT strategy, operations strategy, organizational strategy, etc. (which itself is not always so clean – e.g., the Booz Digital folks would likely argue that digital strategy helps drive/disrupt the business strategy rather than just support a traditional business strategy process), a cohesive and tight-knit group that is proud of its brand is often the hardest to integrate, especially if the partners are older and/or looking to cash out (e.g., as PwC found to be the case with its PRTM acquisition).
But candidly, Booz probably had to do this acquisition rather than just be caught between the mega firms and the boutiques. It’s hard competing with the top end strategy firms who’ve gotten better at transitioning to lower-level strategy execution projects (and reducing costs for general services delivery – see below), and similarly against the mega players in the mega deals.
For example, McKinsey led the charge in building out an offshore shared services delivery model in India – one that actually works – in which on-site consultants across the globe now funnel half-baked stuff to IIT grads to put in nice frameworks and run some numbers. Contrast this with studies from the dark ages (circa 2000) which relied on BAs, Associates and EMs sketching out detailed charts on graph paper with mechanical pencils for graphics assistants to refine at 1:00 AM before a senior engagement manager or partner would give it her blessing at 5:00 in the morning. We digress (though what McKinsey has been able to do in leveraging India has forever changed consulting in our view).
Others have not been as prescient. Part victim of the professional services shift, E&Y found itself in the position of having to change its DNA after getting squeezed, but to its credit has been busy bringing on experienced partners (e.g., senior journeywoman Sarah Pfaff) and building out a niche a procurement and outsourcing advisory practice (niche relative to the larger players). PWC, after selling off its consulting arm to IBM, also was slow to rebuild in the past decade in key practice areas.
When it comes to operations consulting (inclusive of procurement and supply chain), the combination of PWC and Booz represents a merger of two smaller players. PWC has lagged Deloitte and KPMG in building out a significant procurement practice as an example (Deloitte did it organically; KPMG did it organically and by acquiring BrainNet in 2012 and outsourcing adviser Equaterra). But, it is still a formidable presence, especially in Europe.
Although Bernhard Raschke has left (executive recruiting beckons as he attempts to change the European talent game for procurement/operations leadership), CPO luminary and Cranfield University professor Remko Van Hoek is trying to bring a little magic to PwC's consulting business like John Paterson did at IBM. But, PwC doesn't have the advantage of telling the story of how it re-invented its own supply chain like IBM did over a decade ago. Still, if there’s anyone with the knowledge and ‘confidence’ to pull it off, it’s Remko.
Together, by our estimates, the combined operations and procurement assets of PWC and Booz will still trail Deloitte and KPMG by revenue (and AT Kearney for that matter – not to mention McKinsey and BCG which quietly make a very significant portion of their overall revenue from operations work). But even more important than combined practice size, the proof in these deals is always in the execution, and such execution is fraught with risk.
As I said earlier, we’ll be following up with a PRO piece on this that should help practitioners with a checklist of things to watch out for, and for the providers who might shockingly bear some strong resemblances to the proverbial shoeless kids of the cobblers. It’s an apt metaphor for these deals that do often get cobbled together regardless of how well they’ll fit the consultants in the trenches and the clients they serve.
We have many contacts in these firms and will stay close to this deal as it progresses. Stay tuned.
See related posts and research briefs:
AT Kearney and Booz to Merge? Procurement, Sourcing and Operations Implications
KPMG to Acquire BrainNet — Initial Reporting, Analysis and Recommendations
Monitor and Deloitte: Exploring Cultural Synergies and Differences
Monitor Group Goes Bankrupt: Why Services Procurement and Risk Management Best Practices Matter
Monitor Group’s Bankruptcy: Risk Management and Services Procurement Matter
Monitor Group: A Failure of Scenario Planning
Monitor Group and Libya: The Consultant Interview and Perspective (Part 1)
Monitor Group and Libya: The Consultant Interview and Perspective (Part 2)
Monitor Group and Libya: The Consultant Interview and Perspective (Part 3)
The Booming Procurement Services Market: Backdrop and Challenges
Procurement Services Market Landscape: Market Drivers and Trends
Procurement Services Market Landscape: The Continuum of Procurement Services
Procurement Business Services: Part 1 – The Promise and The Problem
Procurement Business Services: Part 2 – Defining, Building, and Delivering
Sourcing Managed Services: Not Consulting, Not Outsourcing