L.E.K. Consulting attracts capital from Lloyds to fund expansion plans
L.E.K. Consulting, a management consultancy employing over 1,200 professionals across 19 offices worldwide, has attracted a financing package from Lloyds Bank, to drive the firm’s expansion plans. Leveraging the capital, L.E.K. Consulting aims at investing in high growth consultancy segments, such as digital and innovation, and growing its geographical footprint.
In a press statement, the consultancy states that the funding has been attracted to support the firm’s growth strategy. “Organic growth is at the core of our growth strategy, and we see opportunity in the full range of sectors we serve,” said Stuart Jackson, Global Managing Partner of L.E.K. Consulting. The London headquartered consultancy works for clients across all major industries, including a presence in financial services, pharma and life sciences, private equity, aviation, consumer products, energy, healthcare, entertainment, industrials, transport and retail.
In a move which would be a departure from the steadfast commitment to organic growth through L.E.K’s 30+ year heritage – L.E.K. Consulting hasn’t closed a major acquisition for over a decade – Jackson highlighted that the firm may now push for selected acquisition opportunities “if the right targets arise”. While the larger consulting firms such as the Big Four have made it a common practice to acquire peers to bolster their footprint, with the top strategy houses going for a more selective approach*, consultancies the size of L.E.K. commonly grow inorganically though the addition of local partnerships that want to join a global network.
The firm is from time to time approached by local boutiques that are interested in joining L.E.K’s global partnership, commented Jackson, explaining, “We have an attractive platform for regional or specialty firms who want to be part of a differentiated owner-operator partnership but with the resources and capabilities of a global firm.” Commenting on how L.E.K. deals with such interest, he elaborated, “We consider all approaches carefully and we are open to growth opportunities through regional or specialty firms wherever they arise.”
Founded in the UK in 1983 by three partners from Bain & Company, L.E.K. Consulting has since established itself as one of the premier players in the consulting industry. For several consecutive years, the firm has been ranked by consultants as one of the globe’s twenty most prestigious players, while from an employee perspective, L.E.K. was named a top consulting firm to work for by both Vault and Consulting Magazine (two North American publications) last year.
Lately, the firm’s clients have also been applauding its services. In the UK, L.E.K. was named one of the country’s leading management consultancies by the Financial Times, while in a global survey among 3,000 executives that work with consultants, L.E.K. was named the consultancy with the most differentiated offering in the industry, ahead of the likes of strategy & operations peers A.T. Kearney, Bain, Boston Consulting Group (BCG), McKinsey & Company and Strategy&.
Geographical expansion
Asked about where the accents of the growth strategy will lie, Jackson said that, although all geographic markets represent opportunities, “We will pay extra attention to emerging markets.” The firm’s office in São Paulo (launched in 2013) serves the Latin American market, while in fast growing Asia, the consultancy has offices China (Beijing; Shanghai), Japan (Tokyo), India (Mumbai) and South Korea (Seoul). In comparison, A.T. Kearney, which is larger than L.E.K, has 11 offices in Asia, and 4 in the Middle East, a region where L.E.K., has yet to establish an on the ground presence.
Besides geographic expansion, the privately-held partnership, UK’s largest strategy consultancy from home soil and together with Roland Berger (Germany), OC&C Strategy Consultants (UK) and Simon-Kucher & Partners (Germany) the only European players with a global reach that battle the MBB’s and other US-origin rivals, L.E.K. Consulting will also use the funding to invest in its client offerings. Technology capabilities is at the heart of this plan – tech-driven trends such are big data, e-commerce, internet of things, industry 4.0 and digital are sweeping through industries across all corners of the globe. “We are expanding our capabilities to support clients through these challenges and opportunities,” explained Jackson. “We want to make sure we have full flexibility to grow in advance of the changing nature of consulting services.”
By doing so, L.E.K. will be keen to ensure that it continues to stay ahead in the digital space, which is the fastest growing segment of the consultancy industry, and while it may not seem so on the surface, represents a key segment for strategy consultancies. Analysis of the revenue progression of the MBB’s, for instance, shows that they have thrived amid the digital transformation boom, as strategic players find themselves ideally positioned to translate strategic objectives into digital endeavours. If L.E.K. does not remain ahead of the curve, the scenario looms which hit OC&C in two of its key markets – Germany and France. In both locales, OC&C lost its entire country teams to EY-Parthenon, with EY’s financial muscle to invest in digitsation capacities one of the main deal-drivers that were cited by transitioning partner teams.
Jackson added, however, that the client service investment is broader than just digital, stating, “We're developing and pursuing innovative ideas and strategies on behalf of clients in nearly all of the sectors we serve.” Among the services L.E.K. offers are corporate strategy, mergers & acquisitions, operations, organisation & performance, sales & marketing and turnaround.
Lloyds financing package
Commenting on the financing package, backed by Lloyds Bank Commercial Banking, Jackson said, “This arrangement will support our ability to expand in anticipation of our clients' needs, and serve them in innovative and effective ways.”
While no details of the package with Lloyds have been disclosed (a common practice in partner-led privately-held environments) – the lack of concrete deal structure news coming from the two parties may set the rumour mill trundling into life, as speculation may grow on strategy consulting deal activity in the past. For instance, prior to selling off to PwC, Booz & Company partners had fiercely denied any intentions of selling, while OC&C too openly denied that there were signs of losing its partners in Germany and France; something which was proven not to be the case just months later. In the case of L.E.K. Consulting, while the firm does not disclose its financial figures, Jackson strongly states that the firm is both “growing and profitable.”
A statement by Nick Hughes, who sealed the investment on behalf of Lloyds Bank, reiterated that point, remarking that L.E.K.’s positive outlook proved decisive for giving green light to the deal. “L.E.K. Consulting is a thriving global firm and has a clear growth strategy in place. Our financing support demonstrates our confidence in the quality of services provided by the business and its management team.”
In its option for financing, L.E.K. opted for a different approach than several other rivals that have made the walk to growth capital. Sitting on the back of records in dry powder, private equity are eager to investing in the consulting industry – an analysis by M&A advisor Equiteq shows that the share of private equity in consultancy deals stands at its highest point in over a decade. However, contrary to the likes of AlixPartners, Capco and PA Consulting Group, who have all turned to investors in the past years, L.E.K. Consulting’s partners consciously decided to keep “full control of their own destiny.”
With the additional capital on board, Stuart Jackson and the other senior members, including Nick Holder, Asia Pacific Region Head; Peter McKelvey, Americas Region Head; and Jonathan Sparey, Europe Region Head, said that they are confident they are well placed to capitalise on the potential. “Our clients and prospective clients are facing dramatic and rapid changes in their respective markets. Consequently, our advice and insights are increasingly sought after in a broad range of industries and geographies,” concluded Jackson.
Related: AlixPartners eyes next phase of growth with new ownership structure.
* McKinsey completed numerous acquisitions last year, including Malaysia-based design firm VLT to their digital labs, alongside the purchase of change management expert Aberkyn, while BCG purchased digital design firm MAYA in 2017, and procurement and operations consultancy Inverto the year before.
