Bain acquires Proxima. Was this a smart move?

Bain just announced its intent to acquire Proxima Group, with the firms announcing that they will leverage their combined expertise and services to strengthen Bain & Company’s existing procurement services.

Bain’s acquisition of Proxima was somewhat of a surprise regarding Bain as a buyer, but not Proxima as a target given its attractiveness regarding capabilities and ease of post-M&A integration. This was a smart move by Bain to grow in a hot market, albeit one recently tempered with recession concerns, and not an unexpected one.  As we just wrote in our recently released 80+ page analysis into the procurement services market.

We expect more inorganic growth as firms will pursue M&A activity to close “map gaps” (geographic presence), “app gaps” (to use technology/service hybrids or niche tech firms with unique IP) and “rolodex gaps” to gain access to CPOs and upstream strategic transformation work. Consulting firms are slowly adding more managed services, including digital app/content/community subscriptions, and access to on-demand capabilities … and consulting firms with productized services and IP will be much more attractive acquisition candidates.

In this case, Bain brings the Rolodex, and Proxima brings scalable IP and a strong UK presence to bolster Bain’s ranks.  For global strategic consultancies like Bain, an acquisition is a proven way to grow quickly and demonstrably in a critical competency area like procurement and supply chain. This move is very similar in scope and size to BCG’s acquisition of Inverto in 2016, and actually puts the firm slightly ahead of BCG in terms of FTEs (but still behind McKinsey within the “strategic consultancies” sub-segment of the consulting segment of the industry), which is only one consideration for providers (we outline over 40 attributes in our service provider profiles). The strategy to acquire is also a good one. Bain has a large ecosystem of focused partners for tools, data, technology, and expertise, but as we wrote in our report: “It’s unclear though whether partnerships between high-end consulting/advisory firms and the BPO firms will meaningfully grow and impact the market.”

For more information on our report (contact us for more information) and PRO series for detailed trends and players within the segment or broader market (the research synopsis can be found here free for download).

Casual observers might ask what a strategy consultancy is doing buying what appears to be a consulting/BPO hybrid.  But, as we wrote in our report: Proxima isn’t a traditional mega consultancy built around large S2P technology vendor practices, nor is it a mega BPO focused on offshore labor arbitrage or operating a complex client technology infrastructure (i.e., “your mess for less”).  The firm is very strong in procurement transformation (e.g., operating model redesign), cost optimization, M&A support, digital transformation, innovation, supply risk/resilience improvement, and the burgeoning need for ESG support.

We’ll be diving into more deal specifics as we get more inside intelligence from the respective firms, but for now, this move is clearly signaling to the market that Bain intends to compete aggressively to deeply serve the procurement and supply chain services market where generalists will only go so far.