Deloitte and Monitor: the challenge is yet to come

It looks like a good match.  Deloitte, like all the Big Four firms, would like to expand its footprint in the strategic consulting space, giving it greater sight of, and input to, the type of issues and decisions which drive organisations and their use of consultants.  Strategy work continues to command higher fees so there’s important margin to be won here too.

Monitor is about the right size (not too big, not too small) and - despite having its reputation tarnished by recent events - is generally respected by the clients who work with it. In organisational and cultural terms (and this is where so many mergers and acquisitions in the consulting sector run into trouble) it should be relatively easy to absorb. But therein lies a potential problem.

Previous attempts to bring together Big Four and strategy firms have foundered on one of two problems.  The first is price: strategy firms tend to put a higher value on their business than their potential purchasers do.  But the second, more fundamental issue is that the Big Four want to have their cake and eat it. They want to acquire firms which have a strong brand in the strategy space, otherwise it won’t bolster their credibility with clients en masse; but they also want to bring in capabilities, a pool of new, highly-skilled resources which they can integrate into their existing business.  In practice, these two objectives are often incompatible: a brand that’s big enough to help reposition a Big Four firm’s brand (and that has to be pretty big) is going to come with a lot of people and a distinct culture, making the integration process hugely challenging.  However, firms which are small enough to be fit in simply disappear along with their brand.

The challenge and opportunity in most cases is about squaring this circle: exploiting the brand while leveraging the resources. For which I think the only solution - and I’ve written about this before - is to turn the conventional approach to M&A on its head. In this case that would mean Deloitte moving its strategy practice into Monitor and billing the latter as 'Monitor, a Deloitte member firm' (or some such terminology). In other words, rather than pull Monitor into the bigger Deloitte organisation, it would take part of the Deloitte organisation and move it into Monitor. That’s quite a difficult approach to sell internally, not least because if goes against the grain of the ‘one firm’ philosophy to which all major consulting firms have subscribed since Marvin Bower took over McKinsey in the aftermath of the 1929 Wall Street Crash.

But it's also quite a challenge in this case because of the niggling caveat: the tarnished reputation of Monitor. If success does indeed depend on Deloitte moving its strategy practice into Monitor, but the damage done to the Monitor brand makes doing so unwise, then Deloitte might just find itself between a rock and a hard place. The match might not be so good after all.