April 22, 2015

Big 4 Grab Headlines, But Other Large Accounting Firms Are Joining the Fray

Over the past several years, much of the media attention on M&A in the Consulting industry has revolved around the Big 4 – and for good reason.  The Big 4 combined have completed more than 50 transactions over the past couple of years highlighted by PwC’s acquisition of Booz & Co and EY’s acquisition of The Parthenon Group.  KPMG, which has actually been the most active (10 deals since January 2014), announced its latest acquisition last week in acquiring the healthcare consulting firm, Beacon Partners. 

While the level of activity and success in M&A from the Big 4 is unprecedented, it isn’t only the larger consulting firms (Accenture, FTI, Oliver Wyman, etc.) that are unusually active. We have seen a dramatic increase in M&A interest in our consulting clients from the next tier of accounting firms.  This group of acquirers includes familiar names like Grant Thornton, McGladrey and BDO, but also includes some lesser known names like CliftonLarsonAllen, Baker Tilly, Crowe Horwath and CBIZ.   These firms traditionally grow their core accounting and tax businesses through merging with smaller regional firms, but lately have turned their attention to consulting firms.

The Big 4 have seen consulting services provide better growth prospects and higher rates per professional, which has been the primary driver for ramping up their M&A efforts, so it is reasonable to conclude this has begun to trickle down to others in the industry.  However, much like the Big 4 from 10 years ago, figuring out how to effectively pursue deals (including appropriate structure and valuation) continues to be a battle for many of these firms.  We expect M&A interest from these firms to accelerate and with that experience will come improved internal processes which will lead to greater success.   M&A in the consulting market is as strong as ever and adding more buyers to the mix will only enhance overall activity.