Jay Alix, founder of AlixPartners, has joined forces with three investors to acquire the firm from CVC Capital Partners, the private equity group that bought the global management consultancy four years ago. As part of the change of ownership – the transaction values the consulting firm at more than $2.5 billion – AlixPartners has drafted ambitious growth plans for the years to come.
AlixPartners was founded in 1981 by Jay Alix, initially as an advisory focused on crisis management and turnaround services. On the back of its work for several high profile bankruptcy cases, including General Motors’ Saab division, Kodak and JC Penney, AlixPartners in the intervening period built a reputation as one of the globe’s leading restructuring consultancies.
Over the past 35 years the firm has also diversified toward a broader management consulting and financial advisory firm – today AlixPartners offers services spanning strategy, organisational effectiveness, performance improvement, mergers & acquisitions, investigations, disputes and risk, digital transformation and information management.
From 950 employees to 1,600 professionals
In 2012, the privately-held firm was acquired by CVC Capital Partners, a private equity and investment advisory firm which today manages over $33 billion of assets. CVC bought the firm from its previous owner, Hellman & Friedman, another private equity group, which held a majority stake in the firm for a six year period. Under Hellman & Friedman’s direction, AlixPartners nearly doubled in size to, at the time, 950 employees, with the private equity firm feeling 2012 was the appropriate time for an exit. While AlixPartners’ CEO at the time, Frederick Crawford, was also considering going public, he concluded that the timing wasn’t right, amidst the knock on effects of the financial crisis and the broader developments in the professional services industry, and agreed to the sale to CVC.
In the past four years, AlixPartners has managed to successfully come through another phase of growth, and today the firm has nestled itself as an established full-service consultancy in between the likes of the strategy consulting firms and the larger players such as the Big Four (Deloitte, PwC, EY and KPMG). The consulting firm’s footprint has grown from 950 to more than 1,600 professionals, operating from 25 offices on four continents, compared to 17 offices back in 2012. Growth was driven by organic expansion across sectors, and further lifted by two major acquisitions. Evidence Exchange, a US-based litigation consultancy with 30 professionals, was picked up in 2014, and last year AlixPartners bought Zolfo Cooper, adding around 200 financial advisory specialists to its footprint in the UK.
Next phase of growth
The latest change of ownership sees CVC Capital Partners sell its share to a consortium of four investors: Caisse de dépôt et placement du Québec (CDPQ; one of Canada's larger institutional fund managers), Public Sector Pension Investment Board (PSP Investments; a pension investment manager also from Canada), Investcorp (a US-based alternative investment manager) and Jay Alix, the firm’s founder and current shareholder. As part of the transaction, AlixPartners’ Managing Directors will continue to hold a “significant stake in the firm”, says Alix, and have access to a new equity system.
Commenting on the deal, Simon Freakley, Chief Executive Officer of AlixPartners and former Zolfo Cooper CEO – he took over the helm from Crawford on Janaury 1 this year – says he is “very grateful to CVC”, stating “they shared our vision and played an integral role in the firm’s growth over the last four and a half years.”
Under the wings of the new owners, Freakley says that he aims at propelling the firm into its next phase of growth. “The commitment of this group of long-term shareholders will enable us to continue our strong growth trajectory”, says Freakley, without releasing any further details on ambitions or concrete targets.
In a combined press statement, the private equity groups that backed the deal, not surprisingly, highlight the confidence they have in Freakley and the firm’s leadership in realising the plans on the table. Roland Lescure, Chief Investment Officer and Head of Private Equity at CDPQ, heralds AlixPartners’ “strongly diversified business model” and its deep expertise “that is now sought after worldwide”, while Guthrie Stewart, Global Head of Private Investments at PSP Investments, points at the firm’s “leading market position and outstanding entrepreneurial culture”, two factors he believes will drive its continued success. And, David Tayeh, Investcorp’s Head of Corporate Investment for North America, places the quality of the firm’s Managing Directors in the spotlights.
Fast track growth in the consulting industry, an industry valued at $125 billion globally, with the US holding a 44% share, will however by no means be an easy ride for Freakley. A range of trends such as changing demands from clients, and the heightening of pressures on the back of automation, globalisation, democratisation of top tier knowledge and the rise of the gigeconomy, among others, mean that competition is heating up. In addition, the high growth areas within consulting are shifting toward a number of areas that sit outside the traditional management consulting space, such as design, digital and cybersecurity – areas in which AlixPartners still, according to analysts, has a way to go in terms of capabilities and reach.
Asked how AlixPartners stands out from the rest of the consulting firms out there, the CEO states, “Our unique approach, assigning experienced teams, acting quickly and delivering practical solutions for very complex problems, has been key to our success and allows us to work with some of the world’s largest companies.”
Another challenge Freakley will face is maintaining the firm’s culture even as it seeks to expand its reach and realise its ambitions of becoming a bigger competitor to the larger full-service consultancies.
Chris Stadler, Managing Partner at parting investor CVC, remarks that he is confident the firm has what it takes to flourish, stating: “The firm has evolved into a leading, global advisory business that delivers significant value for its clients. I am confident that AlixPartners will continue to thrive under its new ownership structure.”
In preparation of the firm’s new growth phase, AlixPartners in September launched a new corporate identity, refreshing its logo (the blue and grey in its logo has been exchanged the white and more emphases on green), website and company-wide communications materials.
The transaction is expected to close by the end of 2016. The deal was supported by the Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs, who served as lead financial advisors to AlixPartners and CVC. Legal counsel was provided by Gibson, Dunn & Crutcher (to CVC), Paul, Weiss (to AlixPartners), Simpson Thacher & Bartlett (to CDPQ), Weil, Gotshal & Manges (to PSP Investments), White & Case (to Investcorp), and Willkie Farr & Gallagher (to Jay Alix).