September 11, 2014

Unlikely buyer makes investment in strategy consulting firm, Bridge Strategy Group

Earlier this month, Houlihan Lokey, an investment banking firm, announced that it made an investment in Bridge Strategy Group, a Chicago-based management consulting firm focused on strategy, operations, and performance improvement. Bridge, founded in 1998 by alumni of McKinsey & Co., works with boards, senior management teams, and financial sponsors to address critical issues that often require a unique blend of strategic, operational, organizational, and technology solutions.

The investment is interesting because it reaffirms the trend we are seeing of non-traditional buyers / investors becoming increasingly interested in acquiring consulting businesses. Prior to the deal, Bridge was owned by scandal ridden, Satyam Computer Services (now owned by Tech Mahindra), who acquired the business in 2008 for $35 million. Satyam acquired the business as means to expand its onshore strategy consulting practice in an effort to use it as the spear for larger outsourcing engagements (a philosophy and strategy that many of the offshore companies have tried before and continue to do so on a selective basis today). At the time, Bridge was generating revenue of approximately $17 million.

The investment in Bridge by Houlihan is the first meaningful strategy consulting acquisition by a boutique investment bank. The acquisition gives Houlihan access to a wide array of new client relationships and allows it to potentially diversify its traditional transaction-driven business model into a more stable (albeit likely less profitable), traditional consulting model which typically has longer-term relationships with repeat clients. It will be interesting to see how the deal works out for both firms, but regardless we think the situation will be an improvement from Bridge’s time spent with Satyam/Tech Mahindra where the cultural and go-to-market strategy likely created a challenging dynamic.