Fee income of PA Consulting Group grows 6% to £400 million
PA Consulting has booked a year of strong growth to see revenues hit £400 million in 2017. The 6% growth comes as the latest chapter in the firm’s upward incline, with turnover having taken a decade to recover from a rocky spell after the global financial crisis.
Founded in 1943, by Englishmen Ernest Butten, Tom Kirkham and David Seymour, the firm once known as Personnel Administration has since gone on to become one of the largest consulting firms in the world. PA Consulting Group, as it is now known, has over 2,600 professionals at its command, and a global presence spanning 18 countries. The advisory firm provides business consultancy, technology and innovation services to clients across industries, with public sector work representing about half of its revenues.
In 2005, the employee-owned PA was in the midst of its golden years, and between 2004 – 2008 turnover climbed spectacularly, hitting an all-time high in 2008. That was the year the global financial crisis hit – and it hit PA hard. In line with a trend across the wider consulting industry, by 2010 PA’s income had dropped below the level of 2005 – however, while the firm’s profitability initially followed suit, PA always remained in the black. In fact, PA actually improved profitability during the crisis years and its aftermath, via a variety of optimisation efforts.
On the advice of Chairman Marcus Agius, in 2015 PA brought on board private equity backing from US firm The Carlyle Group in order to further boost its upward trajectory. The group took a 51% share in PA, enabling the advisory to embark on an ambitious growth strategy. In 2016, the first full year of The Carlyle Group’s investment, total fee income at PA stood at £376 million, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) amounted to £52 million.
According to PA, this amounted to a slight decline in income, however, as with the majority of business in the UK, the firm cited its sluggish performance as having been affected by uncertainty in the period leading up to the UK’s EU referendum and by the shock of its unexpected outcome afterwards. In spite of the toll this took on the firm’s revenues in the middle of 2016, however, the firm characteristically managed to turn the situation around, finishing the year with a strong second half performance.
Commenting at the time, Chairman Marcus Agius said, “This is a defining time for businesses and governments alike... As a leading consulting, technology and innovation firm, it is our mission to guide our clients as they navigate these changes.” He added that the period could also be an opportunity, rather than an obstacle for the firm, something which PA’s new investors could help realise. Agius elaborated: “As a firm, we continue to improve and to innovate so that we can support our clients and attract the very best talent. Our active partnership with The Carlyle Group underpins these aims, providing a strong platform and enabling us to fulfil our potential.”
A further year on, Agius’ assertion that the challenging environment could actually see PA add to its revenues has come to fruition, with the help of investment in PA’s growth strategy. While the consulting industry as a whole saw clients keen to seek advice on how to negate the worst effects of Brexit, PA also completed its first large-scale acquisition since 2012, with the purchase of aviation consultancy Nyras, a move which added inorganic expansion to the firm’s strong economic performance. Fee income subsequently leapt upward by 6%, hitting £400 million in 2017, while EBITDA was boosted by an even more impressive 25%, hitting £65 million – a higher margin of success than the firm even saw in its golden years.
In a rapidly changing market, PA CEO Alan Middleton highlighted a blend of thought-leadership and M&A-based expansion as key to the firm’s success, “While we’ve been helping our clients, we’ve also put increased effort into building our own business – where innovation is core to everything we are and do. In 2017 we appeared on more industry platforms, published and promoted more thought leadership and appeared more often in the press.” He added, “We also boosted our aviation capability by acquiring London-based consultancy Nyras…Nyras is renowned for its transaction advisory services in the industry, and the acquisition will allow us to access new markets and enhance our offer to our joint and new clients.”
Once again highlighting the role of private equity in PA’s current growth, Marcus Agius – who will step down as Chairman in 2018 – commented, “Our active partnership with The Carlyle Group gives us a strong platform… Client demand has allowed us to attract more of the best people and to acquire market-leading businesses. As we look to the future, I’m excited at the many opportunities our people will have to impress, delight and surprise our clients. And I’m confident that the combination of our experience and our agility will allow us to make a valuable contribution to the direction society will take.”
