MBBs and Recession

Never posted on the consulting forum before. 

Question for experienced consultants - how resilient or not are MBBs to recessionary cycles? Have heard of some cancellations of major off-sites already (ostensibly to avoid bad 'optics').

How does it compare to banking (pretty cyclical - particularly equity capital markets), and private equity (not very impacted - capital is locked in for many years)?

Comments (6)

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Aug 11, 2022 - 12:00am
astarryworld, what's your opinion? Comment below:

Great question. Ultimately professional services (consulting/banking/law) operate under a fee-based model, with key difference for consulting/law vs. banking being:

1. Economics highly skewed towards Partner+ level, so most topline impact will be absorbed by Senior Partners / Partners during a recession (and vice versa in a blockbuster year).

2. Clear economic impact and "need" which justifies fees, so large corporates etc. would rather cut down on M&A and investment activity (assuming limited cash / challenged economics) given longer timeline to reap synergies and economic value, vs. consulting project focused on cost cutting / restructuring which can sometimes be almost immediate on an implementation study (basically someone to make the tough, unbiased calls). Also more of a "need" given these services sit further up the diligence / approval process (i.e., check the box). In general, bankers do not get paid unless and until the transaction has closed, while consultants and lawyers charge irregardless of the deal is successfully done or not.

3. Wider range of client profiles, including government, non-governmental organisations, research and education institutes, etc. which have a set budget for professional services, as well as strategic projects, that are mostly unchanged even during an economic downturn.

Hence, having been on all sides of the coin (PE/IB/MC), would say consulting is a pretty defensive/resilient business. Manager and below levels would be rather secure even in a worst-case type recession (barring usual CTL process). They may trim expense policies and welfare but job security largely unimpacted (as well as total comp, progression, etc.).

Aug 11, 2022 - 2:02am
legendspirit, what's your opinion? Comment below:

^ I second this. Very well said.

Can confirm from McK and Bain (both NE) recruiters that they do not expect any hiring freezes or cuts this year, whether it is FT or not.

  • Prospect in Consulting
Aug 11, 2022 - 12:40pm

Record profits during Covid should give you some hints

  • Teller in VC
Aug 14, 2022 - 5:51pm

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