French management consulting market grows 3.6% to 4.1 billion

03 May 2016 8 min. read

Large French consulting firms have seen their performance improve over the past 12 months, growing their combined revenues by 3.6%, marking their best year of growth since the start of the global financial crisis. The French management consulting industry is now valued at €4.1 billion, up from €4.0 billion last year.

Between 2009 and 2012 revenues in the French consulting industry contracted year on year, lowering fee income to between €3.8 and €3.9 billion in 2013, according to data from analyst firm Source Global Research (Source). Since, France’s advisory landscape has returned to growth. In 2014 the market grew by 2.4%, and latest data reveals that French consulting firms have been able to accelerate their momentum in 2015, hitting a growth rate of 3.6%. As it stands, the French consulting market is worth €4.1 billion, which sees the nation hold a 3.4% share of the global consulting industry.

Much of the industry’s growth can be attributed to the financial services sector, which makes up more than a quarter of the entire French consulting market and grew by 6.4% to €1.2 billion in 2015. Regulation was a big driver of demand, but the real game-changer was that many organisations embarked upon far-reaching transformation, requiring the support of armies of consultants. “We have seen a lot of major transformation programmes starting up. They had gone off the radar as a result of the financial crisis and are now starting to reappear”, comments Bernard Desprez, Managing Director at Kurt Salmon.

The analysts found that several other industries also had a good year. Consulting to the Manufacturing (€694 million), Healthcare (€122 million), and Retail (€322 million) industries all grew more than 5%. The Public Sector, however, struggled, registering just 0.1% growth to €374 million. “After years of cost cutting and redundancies, many French organisations began to invest in projects that required consultants”, says Alison Huntington, an analyst at Source.

Although the market grew overall, French management consulting firms faced mixed fortunes. Firms with a pure domestic focus found generating higher revenues more challenging than their international oriented counterparts. “Domestic demand did pick up somewhat during the year, but consulting to multinational clients on internationally-focused projects is where the growth and excitement are happening”, reflects Huntington. Firms that are able to match clients’ international footprint while also providing a broad range of skills, such as the larger strategy consultancies, the Big Four and functional specialists, have performed well financially, while particularly mid-sized firms have found it harder to get in on the action. Huntington: “Generally, the larger global firms and those with in-demand specialisms are bullish, while those in the middle talk of hoping for a stable market.”

The fortunes of these mid-sized firms – many considered too big to be specialist but not big enough to compete with global firms – are according to Source a major talking point in the French advisory landscape. A large share are in the process of reassessing their strategies and positioning to keep afloat, while others have agreed to merge with industry peers to bolster their scale. Data from Equiteq reveals that the French consulting industry saw 116 major deals (deals with a value of $20+ million) last year – a third of the number of deals in the UK but twice the volume noted in Germany – of which nearly 80% of deals involved a pure domestic transaction. In comparison, more than 40% of acquisitions of consultancies in the Netherlands and the Nordics are completed by ‘foreign’ players. Examples of recent deals in the French landscape include PwC’s purchase of SMG Group (50 consultants), Solucom’s pick up of Kurt Salmon (excluding Kurt Salmon’s retail and consumer goods units) and the merger between Trexia Consulting and 7M Consulting. 

Yet, some mid-sized French consulting firms consciously shun the above strategies and prefer to opt for a defensive strategy, states Didier Taupin, Managing Partner Consulting at Deloitte. “Lots of mid-sized firms are trying to protect themselves by refusing to grow, refusing to take any risks, and even downsizing.” In other words, they may see the sharks circling but simply don’t want to merge, preferring to adopt a survivalist strategy in the hope that the approach will see them through the dark days, building on the hope that the better times will come sooner than later. 

Risk, regulation and cyber security work in demand
From a functional perspective, risk and regulatory services were the fastest growing consulting service line in 2015 (up 5.9%), driven by a surge of interest in risk and cybersecurity, as well as increasing regulatory burdens on many industries. Technology, the largest consulting service in France – estimated to hold one third of the market – also grew a healthy 4%, driven by demand for services around new technology and existing core systems. Operations management accounts for just over 20% of France’s consulting industry, while strategy consulting – arguably the most prestigious segment – accounts for just over 15% of the market. A recent study by and ESCP-ACE found that, when it comes to prestige, the US ‘big guns’ in the industry, McKinsey, BCG and Bain (known as ‘MBB)’, lead the pack, followed by German consultancy Roland Berger (led globally by Frenchman Charles-Edouard Bouée) and Oliver Wyman (led in France by the Lebanese Hanna Moukanas).

Looking forward, the outlook for 2016 and beyond is across the board positive, yet mixed across segment, industry or firm type. On the bright side, economic recovery is forecasted to further spark growing demand. Digital is earmarked as a key growth area, although, France lags other mature consulting markets such as the US (a $50 billion industry) and UK (a £6.4 billion industry) in this respect. “It seems that the digital revolution still hasn’t delivered a windfall for consultants in France. Clients are still mostly talking about what to do rather than actually kicking off projects.” Firms, however, seem confident that talk must turn into action soon, and are ramping up their digital operations in order to be ready to capitalise when the train starts rolling. “We are now at the stage where our discussions with clients about digital and transformation have reached a point of maturity where they are ready to launch projects”, acknowledges Nicolas Richard, Consulting Head at KPMG France. 

In the public sector growth is likely to stagnate. With presidential elections scheduled for 2017, many clients are putting off decisions about major programmes until the results are in, “so very little growth in the use of consulting is expected during 2016”, says Huntington. And further, consultants acknowledge that the consulting market in France is still fragile. “There’s a worry that the mild economic recovery is built on shaky foundations - that it wouldn’t take much to shatter consumer confidence - and that the bigger, structural issues within the French economy haven’t been addressed and are unlikely to be fixed any time soon”, concludes the analyst.