EY and Parthenon: beautiful, but small

By Fiona Czerniawska

Yesterday’s announcement of a deal between EY and The Parthenon Group is the latest example of the Big Four’s attempts to breach “Fortress Strategy”, that seemingly impregnable part of the consulting market.  With the large firms in the inner keep of this edifice – McKinsey, Bain and BCG – well defended from potential attackers and with Booz, now renamed Strategy&, under the wing of PwC – the number of ways to enter this castle are very limited.

In that context, the Parthenon Group is an astute choice.  Founded in 1991, the firm survived the dot.com debacle around the millennium absorbing some key people and expertise which stand it in good stead in a world which seems to be coming full circle, back to the integration of strategy with technology we saw in the late 1990s. Moreover, while many small strategy firms are seen by clients to be mired in a game of hopeless catch-up, trading on the fact their owners have former employees of McKinsey et al and wanting to be what the big firms are while claiming to be different, the Parthenon Group has always been distinctively self-confident.

What the firm isn’t, though, is big or particularly well-known outside the US.  In the short term, that’s not a problem because the US consulting market is booming: our latest report suggests the growth rate in 2013 was just under 6%, and if you combine that with the slightly higher growth rate in 2012 then the US market has grown by the equivalent of the entire French consulting market in the last two years.  That the deal will strengthen EY’s ability to win transformation work and to bridge the space between strategy and technology in the US makes it potentially very valuable.

But it still leaves open the question of how the firm is going to build a similar presence in other markets – making it unlikely that EY will stop here.