More mergers, vicar?

by Viv on January 25, 2010

The professional services sector is one where firms often seem to be merging. I used to work for Touche Ross, one of those many names which is no more. Much of 2009 felt pretty quiet in terms of merger activity but then in the space of 6 weeks, three come along at once.

Here’s some of the headlines:

Property advisors Drivers Jonas bought by Deloitte
Lovells merging with American law firm Hogan & Hartson
Tenon buy Bentley Jenison

This means it will be a busy time for those in L&D working on the integration and a time of job insecurity for those deemed surplus to requirements, but what’s causing this?

The classic rationale for bigger firms is that you get economies of scale on marketing, IT and L&D, but there are usually also stronger reasons to merge that depend on the inidividual circumstances.

The Drivers Jonas deal appears to be a way that Deloitte can access some higher margin cross selling activities, whilst putting more money behind the Drivers Jonas business and hedging against the cyclical nature of its business. The other two mergers seem more driven by the desire to be able to service larger projects credibly – the theory is that because relatively few firms can compete for this business, higher margins should be achievable. 

The traditional advice for partners during recession is to spend more time and energy looking after client relationships. Now that it seems that partners have had time to be sensing the market for merger opportunities, does this mean that business is picking up? Lets hope so, as the counter-argument that partners have found themselves with far too much time on their hands does not paint a rosy picture.

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