It is surely a sign of the good times returning for consultancies, that
there is a mild bout of acquisition fever doing the rounds. Business is
growing, there is cash in the bank and there is more new business around
than most can realistically handle.
While few of the discussions are likely to lead to anything concrete,
there is an air of urgency about them which stems from the prospective
purchasers’ ambitions to capitalise on the current strong growth in the
market.
Some international groups are looking for a quick way to achieve
critical mass in the UK market, and other smaller firms are looking for
a boost on to the next rung of growth. Interestingly, it is also being
considered as a solution to the recruitment problem that is facing many
consultancies at the moment - the scarcity of good quality staff,
particularly at senior account handling level. Instead of struggling to
find one or two individuals while someone else tries to lure your
existing stars away, the theory goes, why not buy a whole team plus
clients, lock stock and barrel?
If only it were so simple in practice. Without wishing to sound unduly
party-pooping, both buyers and sellers frequently overestimate the short
term benefits the deal will bring, while underestimating the effort
needed to make the relationship work in the long run.
In order to be worth pursuing to their conclusion, such deals must
deliver tangible benefits to both sides. Otherwise it will a risky
investment. Above all the cultures must be compatible, the client lists
complementary, and it must all be underpinned by a clear strategic
vision of the future direction of the consultancy business and the
company’s own position in the market.
Occasionally, opportunistic deals can work magnificently. A likely case
in point is the re-entry of Biss Lancaster founder Adele Biss into the
consultancy market, in a deal which secures her the rump business of Ian
Greer Associates. But one reason why this deal looks so promising is
because she brings a wealth of experience but no existing agency culture
to impose, and because she is taking on a consultancy which wants to
start afresh.
But for most agencies, a quick glance at the Top 150 should be enough to
disabuse them of the notion that it is possible to muddle through a
merger without meeting all of the above pre-conditions. Those
consultancies and groups that have generally got it right now dominate
the rankings. Those that didn’t have either tumbled down the rankings or
have collapsed altogether under the weight of their expectations.
