M&A activity is rife at present, and as a result a significant amount of boutique management consultancies have been snapped up by larger players. Since 2019, Accenture alone has acquired 92 businesses. But what is driving this growth? And what impact will it have on the consulting industry as a whole?
Mind the gap
As the big consulting firms look to regroup post-Covid, many are taking advantage of growth opportunities by absorbing smaller boutiques in a bid to fill gaps in services or skills. Larger professional services are increasingly acquiring digital and technology-centred businesses, for example, that are seen as complementary to their ‘traditional’ consultancy services.
Equally, where a larger consultancy wants to increase its presence in a certain geographical location, or start a new operation entirely, acquiring a local business can kick start activity. With pre-existing contacts, clients, and local knowledge, acquiring a local boutique saves the legwork of starting from scratch.
Globally, we’re seeing skills shortages in a multitude of areas; and no truer is this than in the technology industry. Where larger businesses are struggling to access suitable talent, with recruitment drives and mentoring programmes not entirely plugging the gap, acquiring boutiques can result in an instant talent boost. Larger businesses can then soak up acquired knowledge and skills, educating the wider workforce in the process.
Longer term impact
As Jonas Salk, the polio vaccine designer, once said: “eventually we’ll realise that if we destroy the ecosystem, we destroy ourselves”. And in terms of the consulting industry, there needs to be caution that not all smaller players are wiped out entirely.
Boutiques provide a valuable role in the consulting ecosystem. By nature of their size, they are more agile to respond to market demands and drive innovation in the process. They can attract game changing talent, that are keen to challenge the status quo, make an impact, and create new solutions. Smaller boutiques are less risk averse, therefore keep larger competitors on their toes – by trying to keep pace.
If larger organisations wipe out smaller boutiques entirely, it potentially stifles innovation and smothers competition – neither of which is healthy for business. But as we’ve seen time and time again, market disruptors are always around the corner. Just as cryptocurrency shook up the financial sector, large management consultancies aren’t shielded from change either. Whilst M&A activity is vital for business growth, it should be conducted with the view to maintain creativity and innovation – the very reason that made it an attractive acquisition in the first place.