French arm of strategy consultancy OC&C joins Parthenon-EY

06 September 2017 Consultancy.uk

Two weeks after OC&C Strategy Consultants acknowledged the loss of a "senior French team" to Parthenon-EY, in a deal which remained shrouded in secrecy, EY have taken away all ambiguity. The Big Four firm have acquired the entire office of OC&C Strategy Consultants in France, adding seven partners and nearly 45 consultants to its local Parthenon-EY business.

The exact status of the acquisition of OC&C France’s consulting network by Parthenon-EY has been hanging in air for a while now. First rumours about OC&C France being unsettled came in the first quarter of this year, as French partners were said to be thinking of following the steps of colleagues OC&C Benelux. 

The move significantly bolsters EY’s consulting business in France, which has already seen strong growth in recent years. The Advisory business booked 60% growth since 2012, taking its revenue base from $250 million to approximately $400 million today, generated by a team of nearly 2,000 consultants in France. While the firm’s improving figures were lifted by organic growth, an aggressive expansion strategy saw acquisitions became a catalyst behind the unit's meteoric rise however.

The development of EY's acquisition activity in France took its first step in 2013 with the purchase of strategy consulting firm Greenwich Consulting, before continuing the march into the country with the bolt-on of financial consultancy and evaluation firm Ricol Lasteyrie Corporate Finance in 2015. The integration of Bluestone Consulting, which specialised in Data Science, was closed in Q3 of the same year. The latest deal, which sees the integration of OC&C France into Parthenon-EY, further bolsters the strategic advisory portfolio at the firm, including corporate strategy, commercial due diligence and corporate finance.

Revenue developement of EY in France

Parthenon-EY 

Parthenon-EY was officially formed late in 2014 after EY acquired The Parthenon Group in July of that year in a move that saw roughly 350 professionals integrated into EY’s advisory business unit. Since then, the firm’s global strategy consulting unit has seen explosive growth, from the original consultant base to over 1,200 consultants today across the globe. The addition of OC&C France takes EY’s dedicated strategy consultancy team to more than 100 consultants, while Parthenon-EY France can tap into a pool of around 150 other consultants who specialise in strategic matters – leveraging consultants working in EY’s Strategy or TAS service line, among others – an equation which places it among the leaders of strategy consulting in France.

When it was formed, however, Parthenon-EY faced a geographical challenge. While it had a strong presence in the US, where it roots lay, its footprint in Europe was limited. EY have since committed to grow its footprint in Europe, and the journey started with picking up OC&C in the Benelux, with France next in line. And, acccording to insiders on the matter, EY is eyeing more inorganic European growth opportunities in the strategy space to further accelerate its ramp up. Pieter Witteveen, who heads up Parthenon-EY in Europe, said previously in an interview with Dutch platform Consultancy.nl that the firm wants to "significantly grow its European operations" within the coming three years.

Commenting on the deal in a press statement, EY France highlighted that the OC&C team joined to benefit from the power of EY's global network and the breadth of its competencies.

OC&C France, which left OC&C's international network in August, faced two difficulties in the country, admitted Bruno Bousquié, former Managing Partner of OC&C France. "A geographical coverage to serve major French companies across international markets, particularly in North America and China, and the digital investment capacity needed to take OC&Cs strategy consulting offerings to the next level."

EY France - share of business units

Elaborating on the above, and on joining Parthenon-EY, Bousquié said he sees three main benefits. First, he believes access to a global community of multidisciplinary experts is a key asset. Second, it allows for a strengthened expertise in digital and analytics, commenting, “The rise of data is changing the world, and being able to unlock the potential is key to offer leading strategic consulting services.” Finally Bousquié suggested that the cultural fit between the two also inspired much confidence in the joining of forces, stating, “Both firms have an entrepreneurial spirit and agility in the way they operate.”

The belief there is a close cultural fit between the two networks is not new, and in fact OC&C and EY even held merger discussion talks back in 2014, prior to EY’s scoop of The Parthenon Group. At the time, one of the major advantages was reportedly the close cultural similarities between the two, which is well known to be an essential factor for the success of mergers between strategy consultancies. The breakdown of a potential A.T. Kearney and Booz & Company merger, along with the failure of a potential Roland Berger and Deloitte Consulting deal were both by and large due to cultural differences.

Following the obtaining of OC&C’s Benelux operations by Parthenon-EY last year, Witteveen made a similar remark, stating, "As the cultures of our organisations are very similar, we believe integration is a perfect combination and brings rise to the best of both worlds."

Meanwhile, former BearingPoint employee Bousquié, who has been appointed as head of Parthenon-EY in France, has extensive experience with that respective culture, having joined OC&C Strategy Consultants in 2008. Concluding, he added that the three key deal drivers he put forward points toward the combination bringing “very good prospects for our clients and our teams.”

Despite the experience of other firms showing that integration into a large network is not always as straightforward as it seems, Bertrand Baret, a partner in charge of EY's consulting business in France, is optimistic. “This is our fourth such integration in three years. We have learned to work collectively. Seven partners of OC&C France join EY France, and each one will take the lead of a cluster. I am extremely confident that the integration will go well,” he said.

Revenue of EY's largest practices in Europe

An end-to-end strategy consulting offering

Jean-Pierre Letartre, President of EY in France and Managing Partner for the firm’s Western Europe operations, added that he is delighted with the move, pointing at the fact that the firm now has an end-to-end strategy consulting offering in place, enabling it to compete with likes of 'MBB' (McKinseyBCGBain) and the likes of Strategy&Roland Berger and Monitor Deloitte. Specifically in France, according to Baret, the firm now ranks third in terms of strategy consultancy revenue, behind the runaway leaders McKinsey and BCG. This would, however, mean that he believes the firm has leaped ahead of Bain, A.T. Kearney, Oliver Wyman and even Roland Berger, which is led by the Frenchman Charles-Edouard Bouée.

“In a complex and increasingly competitive business environment, executives urgently need a clear vision of the developments to be undertaken as well as operational support to achieve their strategic objectives. This new merger confirms our status as a leading integrated firm capable of driving projects of strategic transformation from A to Z, from vision to operations. We now have a critical size in all the multidisciplinary and sectoral competencies that enable us to accompany leaders through all stages of transformation,” Letartre said. 

Baret added, "The integration of OC&C's French team strengthens our skills in defining and implementing business strategies, operational excellence programmes and transaction support. The structure of our team, complemented by our multi-disciplinary expertise (finance, legal, tax, consulting), gives EY a differentiated positioning in the marketplace.”

In 2016, EY France posted revenues of €954 million, making it EY’s third largest locale in Europe – having grown by 12% on the previous year. Of that total revenue, 42% came from advisory in line with a continental trend which has seen consulting grow in importance to match and even surpass the auditing work which had been the staple of the Big Four advisory and accounting firms particularly for so long. This trend for EY is most drastic in France, with audit now accounting for 38% of revenue. However, a narrowing between the lines of work has also occurred in Germany. Meanwhile, the largest consulting market in Europe, the UK, saw 28% of its €2.3 billion revenue come from advisory, just 1% less than auditing work in 2016.

The top echelon of the consulting industry, strategy consulting, is turning into a battleground for consulting firms, as it provides them with access to the top level of clients (CxO's, executives) and reinforces their prestige in the landscape. Strategy work typically also paves the way for other consulting services, as it paves the way for design and implementation services.

The growth of Parthenon-EY in recent years has seen the firm overtake OC&C and Arthur D. Little, however, the strategy wing of EY is still playing catch-up with the equivalent outfits of Big Four rivals PwC and Deloitte. PwC rocked the strategy consulting scene in 2014 when it acquired Booz & Company for a reported $1 billion price-tag. Strategy&, which formed out of that huge deal now hosts over 3,000 consultants, and recently opened a new office in Brussels to take advantage of the growing Benelux consulting market. After Deloitte’s purchase of Monitor, their strategy arm rose to 1,500 consultants across globe.

The 10 largest strategy consulting firms

The poaching of OC&C France echoes this previous trend, and helps EY make further ground on Deloitte and PwC in period of great disruption in the French consulting market – according to data from Consult'in France, a market worth €5.9 billion – which has seen major reshuffling in top of strategy consulting ranks recently. 

OC&C commits to rebuild

While Parthenon-EY will be treating the deal as a coup, for OC&C, the move is a major blow. The loss of its French consulting office, in particular its senior partner team, is undoubtedly a set-back, however the firm remains committed to rebuild its French operations.

As OC&C look to reaffirm their dedication to independence, as outlined by OC&C's Managing Partner David Krucik mid-June, they have already relocated two partners from the UK to France, along with sealing the return of one of the group’s earliest partners*. Philippe Pruneau, who had left the firm last December, has re-joined OC&C to lead the firm’s renaissance in the country. In a statement following the opening of a new office space at 4 Place de l'Opéra, Krucik stated, “France is and will remain a key market for OC&C. We continue to be committed to offering independent management consultancy to the French market.”

To bridge the challenge of the network’s latest set-back, the French team will be supported intensively by senior advisors from other offices – including the UK – in the coming months to ensure a soft landing. The coming rebuilding of OC&C France will still not be easy however. Consulting, particularly at executive and management level, is based much on personal credentials, meaning the departing partners will have taken (several) relationships to Parthenon-EY. OC&C’s hire of Pruneau is, at least partly, motivated by the hope they can leverage his decades long presence in France, while the firm's other new partners in the country work to establish themselves in the region.

* OC&C France was founded by Philippe Kaas and Ed de Sa Pereira. Philippe Pruneau joined in 1996 after a merger with PwC’s French management consulting arm was broken off.

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