Last week, a cadre of consultants posted in cities from London to Mumbai woke to spiffing news. Their management consulting firm, beefed-up last year by $80 million generated in revenue, was to be absorbed by a bigger player in the consulting sector.
The 300 employees, who ply their trade in most of the world’s major financial centres, will look forward to a bright future. Parthenon Group has long been a choice destination for MBA graduates.
Their offices, split from a Boston base to London, Mumbai, San Francisco, Shanghai and Singapore, contain a legion of graduates advising high-growth SMEs to CEOs at the biggest blue chips.
It would also mark a high point in a period of M&A activity among the big consulting firms. These mergers underscore an industry which is in rude health.
The EY-Parthenon deal is just one of the latest in a long line of pacts, as the biggest consulting companies seek to expand and diversify, and move away from their auditing roots into more lucrative areas of business.
Other firms have followed suit, buying promising medium-sized boutiques in a bid to strengthen their non-audit revenue streams and expand workforces.
Last week’s EY deal smacks of similar transactions by rivals Deloitte and PwC, two titans of MBA hiring, which have bought out consultancies. Last year, Deloitte snapped up Monitor Group, a boutique management consultancy, and in October PwC paid to absorb Booz and Company, a mid-tier firm.
Analysts say that the deals are part of a wider effort to bolster transformational projects, which count for an estimated one-third to two-thirds of growth in consulting.
This is thought to open up a raft of job opportunities for new strategy consultants, as many of these projects start small before blooming into large-scale efforts.
Mark Weinberger, EY Global CEO and chairman, said: “Adding the high quality talent of the Parthenon Group to EY’s rapidly growing strategy consulting capabilities will be a powerful proposition in the market.”
EY in particular has already hired thousands of new staff for its UK operations, bolstering an already 11,000 strong workforce there. The firm’s hiring spree was revealed earlier this year, before it announced plans to hire 3,700 new employees for its assurance, tax, transactions and advisory units in Britain by the end of June.
Some expect more small acquisitions to take place. KPMG, another of the big four, has been trying to buttress its alternative investments practice. The firm recently bought into the hedge fund services business, buying Rothstein Kass, a US firm which provides advisory services to hedge funds, in July.
A month earlier in June, KPMG snapped up independent IT consultancy Safira, which provides business process management solutions for IBM.
The industry’s appetite for acquisitions is fuelled by massive global revenues, which for some have been the fastest growth margins since the crisis in 2008.
This growth is likely to create jobs across the industry, particularly in the expanding areas of strategy and transaction advisory, the latter the service area which Parthenon will become part of within EY.
Tony Somers, director of the Career Management Centre at HEC Paris, says: “A combination of increased activities in areas relating to consulting and takeovers of traditional consulting firms, principally PwC’s purchase of Booz and Company and EY’s near-purchase of Roland Berger, has resulted in increased recruiting activity in recent years from these firms.”
At HEC, the French business school, the big four firms accounted for 30% of all consulting sector hires last year, up from 20% in 2012. The school expects similar levels of demand when it posts 2014 figures in September.
At Spain’s ESADE Business School consulting employment dipped slightly during the aftermath of the Eurozone crisis but has rocketed back up to the levels seen in 2011, when 33% of MBA students were hired by consulting firms, a spokeswoman said.
Vera Moser, associate director of corporate partnerships with consulting firms at ESADE, says: “We are having an increase in the percentage of consulting placements already [this year]. It’s very promising.”
She adds that strategic consulting is the most popular area among MBA students, but companies are offering more job placements in auditing. “I have a feeling that auditing is going to increase in demand – but for more senior positions,” Vera says.
MBA students may be riding the coattails of huge increases in revenue at the big four firms. EY for example announced combined global revenues of $25.8 billion for its financial year ended June 2013, an increase of 7.7% on the previous year, and its fastest growth since 2008.
But for overall advisory work, which draws the most career interest, revenue grew 18% to $5.8 billion, while auditing revenue grew at a muted 2.4% during the year.
However, EU reforms are set to place a 70% cap on the fees that are generated by firms for non-audit work, and are enforcing mandatory audit tendering and rotation.
Still, this has not resulted in stunted interest among business school students. Vera says: “Consulting is very popular and a lot of students still decide to do the MBA to [enter] into the consulting area. It’s been a staple, and there is huge interest.”
There has been increased recruiting activity among consulting firms at ESADE, adds Vera. “We see it on a needs basis – and there is a big need.”
A recent survey by the Graduate Management Admissions Council, which drew responses from more than 20,000 business school graduates, found a jump in the number of alumni employed in the consulting industry post-crisis.
This year 13% of alumni who graduated with the classes of 2010–2013 are employed in the consulting industry, compared with a smaller proportion of 6% to 10% of alumni graduating between 1980 and 2009.
But it will not be easy to secure a career – even if you have the right background.
Khimendra Singh, an EY consultant who graduated from ESSEC Business School last year, says: “They will be looking for someone with those three analytical, interpersonal and adaptability qualities – so if you are able to prove or show that your previous exposure has allowed you to achieve or experience these things, it will be easier for you.”
Amanda Brown is the national recruiting manager for the US at KPMG. They hired about 35 MBA graduates last year, she said, most of them entering the firm’s advisory practice.
She regularly recruits from Dartmouth Tuck and Chicago Booth business schools.
Amada said that relevant work experience is incredibly important. “Our advisory revenue is approximately one-third of our overall revenue in the US, so it’s an extremely fast growing practice, and a very strong piece of the firm,” she added.