L.E.K. Consulting attracts capital from Lloyds to fund expansion plans

16 April 2018 Consultancy.uk

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.

L.E.K. Consulting has 1,200 staff across 19 offices worldwide

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.”

Stuart Jackson, Global Managing Partner, L.E.K. Consulting

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.”

Quote Nick Hughes, Lloyds Bank

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.

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Accenture's push into the creative sector is an identity crisis

18 April 2019 Consultancy.uk

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.