CEO Alan Middleton on PA Consulting's path back to rapid growth

With PA Consulting’s annual revenue now sitting at £500 million, the group is looking to hit new heights in the coming years. Chief Executive Officer Alan Middleton has outlined his hopes for the firm in the future, as he prepares to step down following 13 years in the consultancy’s top job.

Founded in 1943, British-origin PA Consulting has booked strong growth in recent years, following its securing of private equity investment from the Carlyle Group, the global private equity firm which took a 51% stake in the global management and technology consulting firm in September 2015. With the private equity investment, PA Consulting managed to turn around a period of dropping fees – its revenue at the time of the transaction was still around £20 million lower than that at its peak in 2008 – and has since built up such a momentum that the firm feels confident enough to target a revenue of £1 billion by 2024.

Many might not have blamed Alan Middleton, who has been the firm’s CEO since 2007, for accepting one of the many bids which came in to acquire PA during those lean years. According to him, the offers were certainly there. With the demand of clients shifting to expect more from consultants than simply applying one-size-fits-all tool-kits to business problems, many of consulting’s largest players sought to address this by buying ‘ingenuity’ fully formed via acquisitions of firms like PA.

Speaking in an interview on the firm’s website, Middleton elaborated, “Our competitors all wanted a 3,000-person bolt-on to their organisations called PA. There were four or five approaches a year, from the Big Four, the systems integrators, traditional consulting and strategy firms, everybody.”

Rather than caving to the pressure exerted by the planet’s largest professional services firms, however, Middleton and PA resolved to stick it out and build up Britain’s most prominent home-grown consultancy. The surprising decision to take private equity backing from US firm Carlyle undoubtedly helped push that goal forward, in large part thanks to the order boost it provided by increasing PA’s access to the lucrative US market.

But while PA’s revenue now stands at £500 million, 2020 represents a potential crossroads. Two years after Marcus Agius – the Chairman who was one of the champions of Carlyle’s investment – stepped down, the group is reportedly exploring the possibility of exiting its PA stake. Middleton does not see this as inherently grim news however; the move would be in-keeping with a trend in private equity of investors exiting after four to six years, capitalising on the value they add to a firm.

He further explained, “Carlyle’s investment horizon is on average five years [they’ve been working with PA for over four now]. If PA wasn’t doing well, they’d be here for a while longer. As it happens, we’re doing pretty well. So Carlyle will likely exit, but really they’re a sidebar in the PA story. We’ll have another investor. We might have a more European-based partner next time. But our objective remains that we will have another cycle of private equity investment.”

New eras

Indeed, if the Carlyle era has taught Middleton one thing above everything else, it seems to be that private equity is a better route to take than climbing into bed with larger consulting firms. Following his remarks that PA would seek another investor whenever Carlyle might exit, Middleton added that while larger trade rival remain interested, the idea of “floating” for them makes no sense to him, as it would compromise the aspects of his firm that have made it a success in the first place.

“Why would I want this firm,” Middleton asked, “whose key purpose is to brilliantly serve clients and make the world a better place, to be on the end of a chain being thrown around by the capital markets?... I don’t want their chain around our neck. It creates short-termism and messes with your purpose. We can choose what we want to do… I can determine that we don’t deliver offensive weapons or work for tobacco companies to increase the rate of cigarette production, though we do work with them to minimise the negative impact of smoking. [As a public company] that becomes harder.”

But what of his own exit from PA’s top job? Earlier in February, it was announced that the firm had selected its new CEO, after Middleton set in motion plans to step down from the role after 13 years. Panos Kakoullis will now assume the position after a year-long transition period, having previously led the global auditing wing of Deloitte.

“Why would I want this firm… to be on the end of a chain being thrown around by the capital markets? I don’t want their chain around our neck. It creates short-termism and messes with your purpose.”
_{– PA Consulting CEO Alan Middleton}

Speaking on the news, Middleton recently said that he was looking forward to “working alongside Panos as we embark on the next phase of our ambitious growth plan.” He also stated that he felt the “clear purpose” of PA meant it is “perfectly positioned to accelerate its growth and success,” even after he had passed on the baton.

Commenting on his time as PA’s boss, Middleton admitted that “being a leader in any professional services firm is really, really hard,” but added that the difficulties PA faces are broadly the kind of headaches a firm should want to have. In the increasingly competitive labour market, this chiefly relates to the wealth of talent the firm possesses – people whose presence enables the firm to face new challenges and meet its future targets, but might also catch the eye of the occasional head-hunter as a consequence.

Middleton concluded, “You’re surrounded by people who are almost always smarter than you – and I mean that sincerely. As a leader that’s difficult because it means your best assets are people who could just walk out the door… But the counter to it being hard is the energy and optimism that gets released when you get these people in the room who are fixated on opportunities not problems, who’ll finish the ‘day job’ and then hang out with friends looking at butterfly wings and figuring how to transfer the design principles to consumer goods. I mean, isn’t that exciting?”