Talent Management M&A—The Plot Thickens

Liz-DeVito

As we approach the midpoint of 2015, an interesting story is emerging from an analysis of M&A activity in the HR consulting sector. Of the eight deals completed to date, seven are in the talent management space. This compares to the total of six talent management consulting deals completed in all of 2014, a year in which there was a healthy mix of deal activity across benefits, human capital management, and HR transformation consulting. The interesting part of the story is that most of the activity is coming from players that are relatively new to this market, a plot twist providing an element of surprise to the incumbent market leaders.

Of the Big 3 HR consultancies, Mercer and Towers Watson executed tuck-in acquisitions that strengthened assets and capabilities for specific consulting verticals. Towers Watson acquired Saville Consulting, adding a suite of online talent assessment tools for organizations that want technology-enabled solutions to identify and develop talent. The deal brings Saville’s portfolio of blue chip clients to Towers Watson, including Jaguar, Land Rover, Siemens, and Vodafone. Meanwhile, Mercer acquired the UK’s Kepler Associates in a move to expand its executive rewards consulting business in Europe.

On the other hand are deals that scale the talent consulting capabilities of providers that have been on a journey to expand into this market over the last five years. Executive search firm Korn Ferry acquired Pivot Leadership, now integrated into its Leadership and Talent Consulting segment, and Lee Hecht Harrison acquired Canada’s Knightsbridge Consulting in March, expanding both its North American footprint and human capital consulting capabilities overall. These firms are very competitive players in the high-growth and dynamic market for leadership development consulting, as well.

The most surprising development is Arthur J. Gallagher’s (AJG) move into the talent management space. AJG has been on an aggressive campaign to build its benefits consulting capabilities worldwide, and it continues to target independent brokers and consultants in the US and Europe. Since November, however, AJG has acquired four firms with HR consulting expertise, including Burns-Fazzi, Brock & Associates, Integrated Healthcare Partners, MacDowell Associates Human Resource Consultants, and Titan Group. These are small deals that appear to be more opportunistic than strategic, but AJG’s move into the talent space should not be overlooked. This is a company with deep pockets and clear aspirations to dominate. Just listen to CEO Patrick Gallagher on the next earnings call and you’ll hear what I mean.

While it may be premature to declare talent management as the key driver of deal activity in 2015, something is afoot. This is a dynamic, high-growth market, driven by client demand for increasingly sophisticated and strategic consulting services. I expect the plot will continue to thicken in 2015 with more deals executed in this space.

Liz DeVito is an Associate Director with Kennedy Consulting Research & Advisory (KCRA).

 

***Methodology note: M&A tracking is confined to the top 20 global HR consulting providers, as defined by ALM KCRA.

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