LEK consulting 3 week mandatory leave?
Guys just heard LEK announced mandatory unpaid leave internally - anyone can confirm this? Also has anyone heard of other consulting firms doing the same?
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I find that very hard to believe. Consulting as a people business is tailored to remote/wfh nowadays with technology, unless all their clients are bailing out / temp halting engagements.
Hard to wfh on projects when the clients cancel them...
It's confirmed for North America. All LEK consulting staff are required to take a 3 week unpaid LOA sometime in Q2.
Wouldn't say it's a representation of the consulting industry as a whole. They're heavily over-indexed on PE DDs and deal flow has basically dried up given the situation. They also don't do any cost cutting or ops optimization cases which means no business at all
I do worry for the firm though. If they lack the cash flow to be unable to pay their folks... LEKMPG incoming?
Anyone know about LEK Asia?
Looks like another T2 is going to fall. Soon there will be only Big 4, MBB and a bunch of tiny boutiques.
which makes sense in today's environment. The economics and value prop of these medium sized firm just doesn't make sense anymore. Clients are either looking for the most mature offerings at high rates (MBB) or large scale transformations (Big4) or hand-held personalized services (boutiques)
That being said, LEK has carved out a sizable role in the world of DDs. Would not be suprised if a player like KPMG picked them up since they're actively trying to build their M&A strategy teams
That's likely... unless KPMG is smarter than or has learnt from the failures of the other big 4 players.
Attempts to build capability by acquiring tier 2 firms has not worked out for the others - integration issues (pay / culture) are insurmountable just given how different these are between big 4 / tier 2 consulting, and there really isn't a strong thesis for such an acquisition. If these tier 2 firms were good / sustainable they would have survived, the fact that they need a bail out shows unsustainability in the business and to rectify that something has to give, I.e. Pay, perks, etc - no way the acquired teams will be happy with that, and as the market has seen, tier 2 consultant turnover is high (across Analyst to partner levels) post acquisition and effectively big 4 just ends up acquiring the rights to a tier 2 logo / signboard. The only winners are the tier 2 partners who sold out and cashed out.
Assuming they do indeed run into difficulties, I wonder if LEK could be an interesting target for MBB, possibly McKinsey and BCG to catch up with Bain in the PE consulting market. In a certain way, you would have fewer (but different) integration issues since your are not merging a pure consultancy with a diversified audit, etc. player.
Is LEK that CDD exposed compared to others? Surely this would be hitting PEY too no? They're a big CDD player
I'm sure it is. Deal flow has grinded to a halt with no open debt lines and uncertain management.
Difference is EY-P has cash flow. LEK doesn't have the backing of a EY or PwC
Also the impending merger between EY-P and the old transaction operations may turn out to be a huge blessing for the Parthenon people as that practice had big working capital / cost-cutting capabilities.
Heard LEK internships canceled. Can anyone verify this?
LEK is about 50% DD work and that DD work is heavily concentrated in industrial products as well as CPG. The sweet spot is MM PE firms that buy widget companies based in the Midwest US.
From a strategy to make up the other 50%, they have a decent TMT practice in LA and they have a very good Life Science / biopharma practice.
They do not have much exposure to financial services, energy/O&G, IT or anything else, no government work either. A very focused firm.
The other thing is that they do not do any implementation or integration work / large scale projects.
So if the corp strat and DD work dries up, there isn't much else that they do to offset slowdowns in their bread and butter areas.
Bain is also about 50% DD work. Are they going to get wrecked now too then?
From what I have been hearing, they are doing pretty well. A friend of mine just started in NA and is already rolling onto a restructuring project. Another of my contacts at Bain mentioned that the pipelines are still pretty full, however, with some clients asking for more discounts. Bain is typically known for less traveling when compared to other firms so they have been able to adapt faster to the travel bans. I did also notice that they have started preparing for a recession as early as 2019 (https://www.bain.com/insights/beyond-the-downturn-recession-strategies-…) and have really tried to position themselves as the firm to go to whenever recession hits (although nobody could have predicted how hard and fast this one came).
I'm at Bain, our DD pipeline is still looking very strong. Bottom line is funds still have record levels of dry powder, and they need to put it to work. Yes it's true that sellers of private companies are hard to find in a market with such price dislocation, but a number of the larger funds are looking at take privates given valuations of public companies look a lot more attractive than they did a month ago. Yes some of that price decline is warranted given the real economic impact of COVID-19, but there are certainly good buys to be had that we're helping our clients diligence.
What about credit lines? That's the bottleneck of the whole situation, not $$$ and companies looking for external funding.
It's a great question and you're 100% correct access to credit is the real bottleneck here. The work we're doing right now has shifted a bit to "Hey, prices on this public company have come down ~25% in the past few weeks. Given a fan of outcomes from COVID-19 and their effect on this industry, how should we be thinking about whether this price is now attractive?" as opposed to our normal "We have this CIM on a private target. What do you think?" Deals may not be getting done right now, but funds are certainly still looking at opportunities and want to be armed with as much diligence info as possible so when the credit markets stabilize they can be ready to move quickly and capture value
Where do you get 50% from? That's not even close, it's way lower
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