German team of OC&C Strategy Consultants joins Parthenon-EY

15 December 2017 Consultancy.uk

The German team of OC&C Strategy Consultants has joined Parthenon-EY, in the firm’s third scoop of a country office from the international strategy consultancy in the space of fifteen months. The move propels EY’s strategic advisory portfolio into the top ranks of Germany’s growing strategy consulting space, while OC&C has immediately commenced efforts to rebuild with the launch of a new Munich office.

Since its foundation in 2014, Parthenon-EY has been on a constant growth trajectory. When EY, a global accounting and consulting firm, acquired The Parthenon Group in July of that year, the strategic consulting firm had roughly 350 professionals. Following the most recent bolt-on of OC&C’s German operations, Parthenon-EY is now estimated to have over 1,300 consultants across the globe.

While its growth has come from all regions – Parthenon-EY currently has offices in 22 countries – its path has varied across its footprint. The firm’s US and Asian outfits have been growing organically, primarily through expanding teams with new recruits and small team carve-outs. On the other hand, the European arm has simultaneously pursued an aggressive ‘buy-and-build’ strategy. To establish a continental presence, EY has been establishing small Parthenon-EY teams at a local level, including in Germany, Italy, the Netherlands, the Nordics and Spain. Yet, against the backdrop, M&A plans were crafted to significantly speed up the process, as Parthenon-EY has been buying its way into Europe’s strategy consulting scene.

Only seven years ago, the picture was significantly less rosy for strategy consulting firms , with multiple assessments from analysts suggesting that the area would feel the pressure of the global consolidation trend of the large generalist consulting firms, with the rejuvenated consulting wings of the Big Four leading the way, as well as an outlook of diminishing strategy spend by clients.

Revenue of the seven largest strategy consulting firms

The warning signs first emerged in 2010, when A.T. Kearney – which returned to independence in 1995 after a poor spell under EDS – and Booz & Company announced they had entered merger talks. The rationale behind the proposed deal was that by operating together with more scale, they could better appeal to the coveted premium client space. However, despite the enticement of that lucrative market segment, white smoke never came, with the firm’s CEOs at the time Shumeet Bannerji (Booz) and Paul Laudicina (A.T. Kearney) confirming after the due diligence phase that the cultural gulf between the firms was insurmountable.

In years that followed, strategy consulting continued to flounder: the curtain fell on the Monitor Group (which was acquired by Deloitte, today Monitor Deloitte) – which had been co-founded by strategy guru Michael Porter – while Booz & Company was finally part of a successful deal. The firm was purchased by PwC from under the nose of suitors KPMG, in a move that dropped a bombshell on the industry, and led to the formation of PwC’s Strategy& outfit. Roland Berger was also approached twice, with Deloitte coming close to buying the firm in 2010, and Deloitte and PwC coming close in 2013. However, following a substantial injection of funds by the company’s founder and namesake, Roland Berger managed to retain its independence.

Strategy’s renaissance

How different the story is today, as the global strategy consultants find themselves thriving like never before. In 2010, market leader McKinsey & Company had a revenue of around $4.8 billion. Today, it generates $8.8 billion across its 120+ offices, while nearest rival The Boston Consulting Group (BCG) has seen its revenue jump from $2.8 billion in 2010 to $5.6 billion today. Bain & Company, the third of the ‘MBB’ trio, added just over $2 billion in revenue to reach its current estimated total of $3.9 billion. The traditional challengers, A.T. Kearney (strong in operations strategy; $1.2 billion today), Oliver Wyman (particularly strong in financial services; $1.8 billion), Roland Berger (the only European origin player in the top echelon; $1.1 billion) and Strategy& (following a dip after PwC’s integration, the consultancy grew by 17% last year to $1.2 billion) also all managed to book growth over the past years.

The renaissance of strategy consultants has, however, been more blended than during previous upswings. Strategy firms have branched out into others areas, mobbing into high-level operations consulting, or even segments that were previously unthinkable, such as digital, design, solutions and implementation. McKinsey, for instance, is running a large solutions business, and  acquired Aberkyn last week to supplement its soft skills and implementation arm. BCG has its BCG Digital Ventures arm, and Bain has Bain Digital. Looking forward, the new segments are predicted to offer new pools of growth potential, with strategy consultants well placed to take advantage of them because of their top-tier portfolios and high ranking client-networks, turning the prospect of strategy consultants upside down over the coming era.

It is this backdrop, combined with the consistent pursuit of remaining a “gold standard” player operating independently, that motivates OC&C Strategy Consultants in retaining its independence, according to James George, the firm’s International Managing Partner.

The globe’s 10 largest strategy consulting firms

OC&C remains confident

In a statement reiterating what his predecessor, David Krucik, told Consultancy.uk in June 2017, George said, “For us, greatness is not about scale. It is about knowing what we’re good at, being relentless in the pursuit of the right answer, and doing it with a group of exceptional people. This combination is what makes us confident about our future.”

With revenues of under $150 million, generated across its footprint of 14 offices in nine countries, OC&C Strategy Consultants is nevertheless a much smaller player, and one that has faced notable set-backs in recent months. Having already suffered from the twin body-blows of losing the firm’s Benelux and French divisions to Parthenon-EY, OC&C has once again been staggered by its predatory competitors, with James George himself admitting that the departure of the network’s German partners is upsetting, stating, “It is always disappointing when partners leave the network”. 

George added, however, that OC&C still steadfastly believes in the ‘one firm’ strategy that the consultancy began adapting to a few years back, which, alongside the financial incentives offered by Parthenon-EY, has been speculated as one of the reasons for the German partners’ exits. Under Krucik’s former leadership, the partner-led firm initiated a plan to steer its company through one of its biggest organisational changes since launching in the UK in 1987. In a move to bring the growing consultancy in line with rivals such as McKinsey, BCG, Bain and Roland Berger, the firm began transitioning from its historic federalised model of franchises, into a centralised international partnership model.

George explained that the reasoning behind this was in response to changing markets and expanding demand, stating, “Three years ago we realised that in order to do our best work for clients, we needed to evolve our firm’s structure, substituting a federation of offices for a more closely integrated partnership.”

The transition, time has taught, has come with ups and downs. While it is suggested to be a key reason behind partners heading for Parthenon-EY – in part because they would lose freedom to operate independently with OC&C – on the back of the successful integration, George says that the firm has created a much stronger platform for competitive edge, geared towards long-term growth. OC&C’s integrated offices (the UK, US, Italy, Turkey, Poland, China and Brazil) have booked growth of circa 15% in the past 12 months, according to the firm’s own data, which would place the consultancy ahead of a large share of its competitors.

Revenue of top 10 accounting firms in Germany

“In the markets we operate in, we have leading positions in our chosen specialist sectors, namely retail, leisure, fast moving consumer goods (FMCG), technology, media and telecoms (TMT) as well as B2B services and private equity,” George said.

Arguably more importantly for the firm’s sustained future is that the growth has been executed with an on-par leverage, producing dividends which are interesting enough for partners to remain on board and commit to the vision it has stipulated for the coming years. George describes the firm’s crossroads as “an exciting next phase of growth”, hinting at the prospect that the advisory group will be adding a number of new integrated offices in 2018, as well as launching new service offerings.

Nevertheless, the blow in Germany will undoubtedly be felt. A team of fifty consultants, including fifteen partners*, have left the firm to join Parthenon-EY. Among the senior partners that have departed are Chehab Wahby (OC&C’s former Global Managing Partner between 2011 and 2016), Björn Reineke (a former Roland Berger partner) and Andreas von Buchwaldt, a twenty-year OC&C veteran.

Parthenon-EY in Germany

For Parthenon-EY, the move can be described as an immense addition to its stature. The countries where variants of German are spoken (Germany, Austria and Switzerland, also known as the DACH-region) have a combined turnover of over €25 billion, representing the largest consulting region in Europe, while Germany’s consulting market alone is second only to the UK, Europe’s largest management consulting market. The German market further has a strong appetite for strategy consulting services, with FEACO, Europe’s association for consulting firms, assessing that strategic services hold an 18% share of Germany’s advisory pace, compared to just 10% in the UK, making Germany’s pie for consultants such as the OC&C’s, Parthenon-EY’s and the MBB’s of this world highly attractive.

Parthenon-EY had already paved the way for its services in Germany by starting to build an ‘EY Strategy’ platform, as the service line is called within EY. The arm is led by five partners: Axel Weiler in Düsseldorf (formerly L.E.K. Consulting), Oliver Runkel in Frankfurt (formerly a Partner at AMR International), and Florian Huber (formerly Roland Berger), Jörn Leewe (formerly at The Boston Consulting Group) and Christian Leu, all based in Munich. They will work closely with the newly joined team of OC&C, rebranded as Parthenon-EY Germany, which will organisationally be integrated into EY’s Transactions Advisory Services (TAS) division.

Revenue of EY in Germany

Meanwhile, at time of writing, EY’s German and Parthenon-EY PR teams have not confirmed the closing of the deal yet (OC&C has confirmed closing). However the firm stated to Consultancy.uk that there is a binding memorandum of understanding in place and that final details still need to be ironed out. Irrespective of the further details that will soon unfold from EY’s side, it is clear that the bolt-on will significantly bolster its strategy consulting service portfolio, adding to its €1.57 billion revenue base.

The deal comes within twelve months of two large acquisitions that EY’s consulting practice has concluded in Germany. In July, EY Advisory bought Eventure, a digital specialist with about 250 employees, while in the summer of 2016, the Big Four picked up financial services consultancy Innovalue, adding 65 staff in offices in Hamburg and Frankfurt.

New integrated OC&C office

OC&C has, meanwhile, been quick to relaunch its presence in a “strategically important market”, with an approach that shows close resemblance to that followed in France. In Europe’s third largest consulting industry, OC&C relocated two French native senior partners from London to its new office in Paris. From the firm’s new base in Munich, Jan Bergmann and Christoph Treiber have been tasked with re-establishing its market footprint. Bergmann is an Associate Partner in OC&C’s Consumer and Leisure practice and returns to his native Germany following eight years at OC&C in the UK and US. Treiber, also an Associate Partner in the firm’s Consumer and Retail practice, spent just over five years at BCG before joining OC&C, where he was based in Vienna, working across a range of assignments in Germany during his time in the country.

They will be flanked by Jim McDonnell, one of OC&C’s most experienced partners, in a role that is similar to that of Philippe Pruneau in France. Pruneau co-founded the French office in 1996 and returned to rejuvenate its operations in the country. McDonnell, an American who has worked across Europe and Germany for 20 years, brings with him 30 years of strategy consulting experience, including spells at BCG, A.T. Kearney, and OC&C over the past three years.

“We now have a team in Germany that is committed to our ‘one firm’ approach and ensuring that the full potential of the integrated network is realised in Germany, especially for our clients. We remain confident and excited about our ability to win ever more clients in that market,” said George.

The Global Managing Partner added that while the entire team has left, the office will not have to be built up from scratch. He estimates that a large chunk of work in Germany over the past two years, particularly in the private equity space (one of OC&C’s powerhouse industries) was generated from UK ties. With OC&C rumbling strong in the UK – the London office has grown by 30% in the last 3 years – he expects this to remain in place, and accelerate the rebuilding in Germany.

Revenue of select EY country organisations in Europe

George explained, “Clients initiated in London in the fields of TMT, consumer goods and private equity have often been executed by joint UK-German teams. We are confident that we will continue to win a material amount of work on these multi-market mandates which have historically accounted for around 20 projects per year.”

By the end of 2018, the aim is for the firm to have a team of 20 consultants on the ground in place in Germany, which is part of its wider plan to recruit 80 new consultants in the new year. It then hopes to be back in a solid position to compete with those who served under its own brand for so long, as well as the well-known strategy names which lead across the globe.

With a revenue of around $1 billion, up from $540 million a decade ago, McKinsey & Company is the runaway market leader in strategy consulting revenue in Germany, according to Manager Magazine, with Roland Berger and BCG following on its heels. Bain & Company, A.T. Kearney, Strategy& (which recently appointed the German Joachim Rotering as its Global Managing Partner) and Oliver Wyman are next in line.

Parthenon-EY’s journey continues…

Across Europe, Parthenon-EY’s journey is expected to continue. In an interview with Dutch consulting platform Consultancy.nl, Pieter Witteveen, the former Managing Partner of OC&C Benelux and today a leader in Parthenon-EY’s European business, said that the firm’s first priority in Europe is to grow the business to the same size as in the US. A simple equation, adding OC&C’s operations in the Benelux, France and Germany, and the recent acquisition of BOX Associates in the Nordics, shows that the firm’s M&A teams still have a job to be done.

Related: OC&C Germany and OC&C Poland join the firm's integrated partnership (on Consultancy.eu).

* According to the OC&C website prior to the departure, the firm’s German partner/director team consisted of Joachim Bähre, Gregor Enderle, Andreas Enders, Sung Ha, Georg Janssen, Kerstin Lehmann, Rolf Pensky, Björn Reineke, Michael Rzesnitzek, Axel Schäfer, Volkmar Schott, Ludwig Voll, Andreas von Buchwaldt, Chehab Wahby and Christian Ziegfeld.

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