"Amid strong pressure on advertising agencies’ business models, a consolidation deal is a credible scenario," Jerome Bodin, an analyst at Natixis, wrote in a research report this week.
He suggested the two most likely scenarios are a consulting or IT services company buys an ad agency group or two ad groups merge as Publicis Groupe and Omnicom tried to do in 2014.
Bodin suggested the first scenario is "most credible" and suggested a consulting firm such as Accenture or CapGemini is a more "likely" acquirer than a tech group such as Google or Oracle.
He outlined several permutations, which could involve a takeover, a merger, or the setting up of a 50:50 joint venture.
All of the five big agency groups, WPP, Publicis Groupe, Omnicom, Interpublic and Dentsu, could be targets, according to Bodin.
"Accenture is a credible buyer," he said. "In view of its size ($90.4bn/£67.5bn) market capitalisation), it could acquire and easily integrate Publicis (€13.3bn/£11.7bn) or WPP (£17.5bn).
He noted shares in Publicis have fallen 11% and WPP by 22% this year and are each trading near "all-time lows" on a multiple of around 11 times’ earnings, while Accenture’s shares are on a multiple of 20 times’ earnings.
"The valuation gap between Accenture and the advertising agencies has never been as great," he added, although he expects any buyer would have to pay "a premium of at least 30%".
He said the "main advantage" for a company such as Accenture would be to buy digital agencies such as Publicis Groupe’s SapientRazorfish and WPP’s AKQA and Xaxis – many of which have been acquired at "high multiples" of upwards of 14 times earnings and could now be bought at "a much lower price".
The "industrial rationale" behind the failed Publicis Groupe-Omnicom merger "still applies today" because it would "create an undisputed leader (particularly in consulting and media buying), limit competition and therefore improve the prices of the services offered by advertising agencies", according to Bodin.
He said "large-scale M&A" is back on the agenda because of a deterioration in the ad agency sector, noting average organic growth among the big groups slowed to 0.2% in the second quarter of 2017 from 1.5% in the first quarter and 2.9% last year.
"This is a sudden and surprising deceleration as it does not come amid an economic slowdown," Bodin said.
"The reason is that some fast-moving consumer goods advertisers (food, beauty products, automotive, etc.) have reduced their spending."
He suggested the pressure on agency groups was "part of a longer cycle" as advertisers have been pushing down on fees for years and the US Association of National Advertisers investigated "non-transparent" practices at media agencies last year.
"Against this backdrop, we believe that the advertising agencies might seek tie-ups to reduce competitive intensity and increase their bargaining clout vis-à-vis clients," Bodin wrote.
"Ad agency executives have often seen consolidation as a means of resolving some of the sector’s problems. This was the rationale behind the Publicis/Omnicom deal.
"With hindsight, the merger would have probably made it possible to avoid (or at least slow the pace of) the current round of media reviews and therefore the pressure that the agencies are feeling from advertisers.
"The new group would then have had more time and above all the financial headroom to carry out its digital transformation in its own time."
Bodin said a hostile takeover was "improbable" because of the importance of retaining staff "but not impossible".
He suggested "the human factor is primarily a risk in the creative advertising and consulting segments" and an acquirer "could consider selling some subsidiaries to their managers, notably in creative or PR" where scale matters less.
Accenture reports annual results on Thursday.
Today we’re turning our attention to one of the world’s most humongous consulting firms – one that often gets lots of attention but mixed reviews from the consulting crowd. We’ve asked the question – why is it that Accenture, the mega consulting and technology services firm – attracts such polarized opinions? With Accenture beating down the door of colleges and universities across the globe, we know you – a prospective consultant – want to know – is starting your consulting career at Accenture a good idea?
Our short answer is this – it depends on what your end goals are. If you have a highly technical background, a real passion for Six Sigma, Lean methodologies or operational efficiency, or an advanced degree without a lot of business work experience, Accenture is a tremendous place to start your consulting career. If you’re interested in consistent 4- or 5-days-a-week travel (they call it 100%), you’ll be right at home at Accenture. If you want to work for a globally recognized brand name – maybe you don’t have one on your resume yet – you should apply and work your tail off to get the interview and offer.
If you’re shooting for MBB, however – then no, Accenture is not the optimum place to start your career. You’re shooting yourself in the foot by accepting an internship or offer at the firm. Why? Accenture has many different business units and the firm’s brand image is largely dominated by its technology consulting arm. Instead of Accenture, you’re better off trying for another launching pad – at a consulting firm that will prepare you for MBB like Deloitte or Booz & Company or a Fortune 500 firm – or investment banking.
We hear from our readers all the time, and some of you are some consulting hopefuls whose resumes don’t fit the MBB profile – either because your grades are A/B-average, you didn’t attend a target school, or you’re pursuing a consulting position later in your career. What’s the option for you if MBB is off the table?
Enter Accenture – a great place for late bloomers to start their consulting careers. With a large global footprint and a client list that extends to 92 of the Fortune 100 firms and more than 75% of the Fortune 500, Accenture offers an excellent foray into management consulting for those of you who want the benefits of consulting but don’t realistically have the profile for a pure strategy firm.
We are excited to reveal our firm profile for Accenture – with many of the pros and cons of working for one of the world’s largest consulting firms, and plenty of info that will prepare you for an upcoming Accenture interview. Enjoy!
ACCENTURE CONSULTING KEY STATS
Accenture Consulting Website:https://www.accenture.com/us-en
Accenture Consulting Headquarters: Dublin, Ireland
Accenture Consulting Employees: 17,000 consultants
Accenture Consulting Locations: 56 countries, 200+ cities
Accenture Consulting Chief Executive: Mark A. Knickrehm
Accenture Consulting Revenue: $3.8B
Accenture Consulting Engagement Cost: ~$300K
Heard of the accounting firm Arthur Andersen? Accenture originated as the firm’s business and technology consulting division back in 1953 when GE asked Andersen to automate payroll processing and manufacturing. The two sides of the company co-existed just fine until 1989 when Arthur Andersen and Andersen Consulting became separate units – and Andersen Consulting was forced to pay Arthur Andersen a significant portion of its profits every year.
Tension over the profit-sharing arrangement increased through the 1990s and came to a head in 1998 when the two divisions entered a litigation war. Three years later, the two parties finally settled, each going its own way. As part of the arbitration settlement, Andersen Consulting was required to change its name. The consulting firm became Accenture in 2001.
Although Accenture’s headquarters lie in Ireland, much of the operational administration occurs in New York and Chicago. The company’s management consulting division is headed by Group Chief Executive, Sander van ‘t Noordende, who joined Accenture in 1987 and became partner in 1999.
Strategy work at Accenture is executed at a lower-level than what you’d experience at MBB. Whereas an MBB consultant will work with C-level execs on the overall performance of the company, an Accenture consultant will work with department heads or directors to influence one particular operational area of the business.
Typical Accenture projects focus on efficiency, cost-cutting, and operations management, as opposed to market growth and development. The scope of your work as an analyst or consultant at Accenture will always be defined by the scope of the project you’re assigned to — if your client projects are focused on supply chain and not strategy, then you’re not going to get much strategy experience. However, you’ll have lots of opportunities to get your hands dirty – from generating business cases to managing a project office to actually supervising the engineers for implementation, Accenture works on the front lines.
Thepractice areas at Accenture reflect the operational nature of consulting projects at the firm:
When it comes to industries, Accenture covers the gamut. From aerospace and defense to media and entertainment, the firm has taken on performance improvement projects for clients in 40+ industries. If you’re prepping for a foray into consulting and want to network effectively, approach someone from Accenture who works with an industry in which you have experience – the firm is very siloed and some practice areas are much more aggressive with hiring than others.
Accenture has local offices in over 120 countries across the globe. While they have a strong presence in the US and Europe, their largest operation is in India, where they have more than 70,000 employees working across 7 cities.
If you’re joining Accenture with hopes to transition to purely strategic consulting at some point, think again. As an unwritten rule, MBB doesn’t directly hire former Accenture consultants. You’ll have to spend another couple of years obtaining your MBA or working at an in-between firm to eventually break into McKinsey, Bain, or BCG because your brand will be so associated with technology that the Top 3 firms will think you’re not able to zoom out to the big picture. If you’re considering a multi-step process because MBB isn’t right on your horizon, we recommend to our clients to bypass Accenture and shoot for an in-between firm or advanced degree right away. Even an internship with Accenture, in this case, could brand you as a technologist and hold you back.
However, if you’re not concerned with pure strategy – perhaps you’re looking to consult in a specific technical area where you have the expertise, e.g., SABRE, Six Sigma – then Accenture is a great fit. Say you have a technical background in systems integration or a Ph.D. in industrial engineering. Accenture is an excellent place for highly specialized experienced hires to launch their consulting careers, and it all starts with the interview.
Now to the nuts and bolts. Undergrads are hired in as Analysts, while MBAs are hired in as Consultants. The career path from there continues on to Manager, Senior Manager, Managing Director, and eventually Partner. The Accenture website has a virtual game that takes you through their career ladder – try it for fun.
Intern pay and training at Accenture are on par with other consulting firms, but from a branding perspective, an internship at Accenture will be considered strongly the second tier. Keep this in mind as you’re applying for summer internships in future seasons.
While starting base salary at Accenture comes in a few thousand less than at MBB firms, which is to be expected, salary and benefits are fairly comparable to starting offers at other tier 2 firms. Here’s the kicker, however – and a contributing factor towards the firm’s high attrition rate — Accenture’s salaries don’t accelerate as fast as those at other firms. Instead of a 10-20% pay increase YOY, Accenture’s figures hover around the 4-5% range, meaning a lot of analysts leave after putting in their first year.
In general, we’ve noticed that Accenture consultants don’t usually approach their positions with a long-term perspective. You’ll rarely hear an Accenture analyst genuinely say, “I plan on working here and growing my career for the next 8 years!” like you might find at Bain. You’re more likely to find that Accenture consultants use their time with the firm for the training and experience, then move on to another position that’s more lucrative and less stressful. Be ready for the question in an Accenture interview – they want to know that you aren’t just using them for the experience – but explain that you’d be open to staying, but open to other options after a few years as well. (It will sound more believable.)
Despite the downside, it’s obvious that Accenture is making an effort to retain their top talent, offering programs like Career Counselor – where new consultants are assigned a mentor who helps them manage their career, training, and project assignments; the Institute for High Performance – a small group of Accenture professionals leading the development of the company’s research; and the Capability Network – a subset of Accenture consultants from key locations in Asia Pacific, Europe, and Latin America who work in teams to provide international expertise in support of local projects.
Leaving the management consulting practice at Accenture may come early on, or after several years with the company. You’ve got lots of options waiting for you once you’ve decided to pursue other opportunities – the most prominent of which is finding a position within the larger Accenture organization. With 260,000+ employees in 120 countries, you’re bound to find something that interests you.
If you’re set on leaving Accenture to pursue a strategy consulting position, pursuing your MBA would be a smart choice for undergrads. If you go back for your MBA, focus on landing a pure strategy summer internship – your re-branding effort will pay off! If you already have your advanced degree, put your efforts into landing a consultant position with another 2nd tier firm that does feed MBB – like Booz or Deloitte.
Like Deloitte (but less likely at MBB), Accenture actually invites its alum to return to the firm later in their careers – the company even has a dedicated Alumni Recruiting Team to handle applications from returning Accenture consultants – so make sure you leave on good terms.
New hires at Accenture fit the typical consulting profile – type A personality, well rounded, outgoing, etc. – and perks and travel at the firm fit the profile as well. Long hours, nice benefits, and 4-days-a-week travel characterize the Accenture experience. Firm culture, historically, is not as strong as it is, say, at Deloitte, where you’re likely to spend time with your coworkers outside of work. For instance, you’d be a lot less likely to grab a drink with your teammates after work at Accenture than you would at Deloitte or Bain. It’s just harder to establish a one-firm mentality inside such a ginormous, distributed firm.
This disconnectedness flows over into firm loyalty as well. Accenture consultants don’t think of themselves as an Accenture person like a “Bainee” or “McKinseyite” would. They’re a consultant who works for Accenture, and they don’t necessarily bleed Accenture red. Given the large size of the company, it’s no surprise that Accenture has a challenge maintaining a cohesive culture like smaller firms do.
Because client projects are typically focused on efficiencies and optimization, consultants at Accenture are usually passionate about the details. They’re used to dealing with the operations world and have fun with processes, flowcharts, and procedures. Someone who likes to dwell on the big picture isn’t going to function as well there.
ACCENTURE CONSULTING INTERVIEWS AND RECRUITING
For soon-to-be grads, first round interviews are held on campus or over the phone during the fall recruiting season. This first round is really a screening round to weed out anyone who isn’t a fit (even if you’re technical, you still need to have a high EQ) or doesn’t make the grade on legit business area understanding. Remaining candidates are invited to a second round interview, which is usually held on campus or in a local Accenture office. Interviewers use the second round to test your case interview skills and situational responses. In fact, the Accenture case interview is largely situational – “what would you do in XXX scenario?” – and while it might be less prescribed than a McKinsey interview, a structured answer still wins the day. In the final round, you’re given another set of interview questions and a chance to meet analysts and consultants from the local office (learn about case interviews here).
Networking your way into a position at Accenture is not hard to do, if you’ve got the right education and experience. First of all, the firm hosts info sessions and career fairs at dozens of schools across the US. Access their events calendar to find out when they’re coming to your school and make sure you drop your consulting-ready resume at their booth.
Secondly, set up your LinkedIn profile and search for Accenture employees in your network. LinkedIn shows over 197,000 Accenture employees, so the likelihood of you knowing someone who knows someone at Accenture is pretty high. For tips on planning your approach and delivering your elevator pitch, go through Networking for Consulting.
Accenture offers an online Career Coach for applicants – an interactive program with video and a quiz, that helps you with career planning, networking, job searching, and interviewing at the firm. It’s a good intro to the company; however, don’t expect it to give you any insider information.
Experienced professionals with specific industry knowledge are welcomed at Accenture. For instance, if you understand health care systems in the UK, or you’re an expert in oil & gas infrastructure management, you would be an incredibly valuable asset to the firm. You won’t be able to rely on your technical skills alone, however. Accenture recruiters look for relationship skills as well.
At the end of the day, Accenture consultants focus a lot less on growth and performance and a lot more on productivity and operations. If your daily passion is saving companies money or increasing throughput, you’re going to fit right in at Accenture.
Are you an undergrad, MBA or intern who’s interested in working at Accenture, but you don’t know how much you’ll make? Check out our latest Management Consulting Salaries post to find out!
Accenture’s MBA target schools are:
Networking inside diversity groups is an excellent way to make connections with a local Accenture office. Diversity group representatives provide a direct contact to working consultants with a shared interest or background. Accenture offers diversity groups for the following:
ACCENTURE CONSULTING LINKS