2015 was a bumper year for M&A activity in the management consulting sector: There were 384 deals globally, compared with just 143 in 2014, and most of those happened in the buoyant U.S. market.
The value of those deals to both consulting firms and their clients is something that our latest research on the topic calls into question, but what about the impact from the perspective of talent? Inevitably, a merger or acquisition creates anxiety in employees, and some of the best and brightest make a preemptive move to competitor, while others take a wait-and-see approach and hope for the best. Some of the latter are rewarded with continued job stability or even a promotion, whereas others get a pink slip months after the deal closes. Without being able to read senior management's thoughts, it can be difficult to gauge what the best course of action may be when M&A rumors begin to swirl or a deal is announced.
Having examined a large number of deals over the course of the last few years, we picked a very small, but representative, sample of five firms that were bought by another firm, to try to understand in more detail what employees did in the run up to, and aftermath of, a deal.
The average attrition rate among those five firms before anyone ever mentioned selling was about 12%. In other words, in an average year, they’d expect to lose about 12% of their existing staff. In the year before the deal was announced that attrition rate fell to just 8% as people dug in and waited to see what it would mean for them. It then bounced back to about 12% in the deal year itself, either because jobs were lost or changed, or because people didn’t like what the deal meant for them.
But it’s what happened in the next three years that’s arguably the most interesting, because what our research showed is attrition falling sharply to a point where, three years after the deal, it’s running at just over 4%. We have to be extremely cautious here, because we’re dealing with such a small sample, but the implication is that an active deals market is likely to be followed by a period of relative stability in the jobs market where more people than normal stay put.
Despite this general trend, there are usually spikes in attrition rates caused by deals that can take them up nearer 20%. They represent opportunities for people looking to join a firm, and what drives them seems to vary from one deal to the next.
Here’s a few that we’ve observed from our analysis:
In other words, prospective candidates of a consulting firm involved in a deal need to listen very carefully to everything being said about the deal – particularly where brand and operations are concerned: Overall, opportunities are likely to be reduced, but there are points at which doors suddenly swing fully open.
Edward Haigh is a director of Source Global Research, a research and strategy firm for the global management consulting industry.
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