LEK consulting 3 week mandatory leave?

Associate 2 in CorpDev

Guys just heard LEK announced mandatory unpaid leave internally - anyone can confirm this? Also has anyone heard of other consulting firms doing the same?

Comments (47)

Mar 27, 2020

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.

Mar 30, 2020

Hard to wfh on projects when the clients cancel them...

Mar 27, 2020

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?

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  • Associate 2 in CorpDev
Mar 27, 2020

Anyone know about LEK Asia?

Mar 27, 2020

Looks like another T2 is going to fall. Soon there will be only Big 4, MBB and a bunch of tiny boutiques.

Mar 27, 2020

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

  • Associate 2 in CorpDev
Mar 28, 2020

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.

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Mar 28, 2020

I wouldn't view the other acquisitions as failures, unless your definition of success is undergrad analyst prestige. The different strategy practices of the big 4 have helped them do what they were meant to do - build an upstream strategy practice to sell bigger transformations.

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  • Associate 2 in CorpDev
Mar 29, 2020

Do you even know what you're talking about - What metrics / indicators are you basing your argument off that the mergers have been successful? The fact that tier 2 signboards are still on the door of the big 4 offices?

  1. There has been high turnover (Across all levels but noticeably at the tier 2 partner level - they leave after their firms get acquired by big 4), 2. The acquired teams (at least 2 firms out of the 3 that I know of) are based in separate offices with little interaction with the other big 4 teams, let alone "cross sales" 3. Big 4 are in early stages of considering disposing of the tier 2 firms due to conflict of interest issues

So yeah.. successful? I suppose to an undergrad it would look like success

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Mar 29, 2020

Let's make sure we're talking about the same thing. I'm talking about success from a Big 4 acquisition perspective. Meaning, has it brought in previously inaccessible revenue? Has it opened relationships to upstream work? Has it led to any bigger transformation projects? That's my interpretation of why the acquisitions have happened. Feel free to disagree with me.

I'm not a partner. I don't have visibility into profitability or other metrics. But I think we can agree that the previous 3 goalposts I laid out have been seen to some degree? EY-P has integrated their TAS group. S& has sold massive transformations.

I don't think any of the three acquisitions have been smashing success stories. TO is high at partner levels. Brand deterioration was severe. Profitability and long-term value prop remains to be seen. But I do think for the purposes of the Big 4, they were not a failure

Also, I think you're just straight-up wrong about the points you bring up. Partners do leave, but that has nothing to do with the big 4's success? Big 4 compensation package and model just don't align with strategy partners, hence they leave. It's a blow but there are also external hires being brought in to fill that void. And S&, EY-P, and Monitor all sit with their respective big 4? In North America at least. And I have no idea how you could possibly know they're in "early stages of considering disposing of their tier 2 firms" Seems just like wild conjecture considering you're an associate. Can you make sure to bring in sources if you're going to make claims like that? Otherwise, you're spreading rumors on an online forum, very unhelpful for it's purposes

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  • Associate 2 in CorpDev
Mar 30, 2020

Not sure if this chap is making consultants look bad or if this is a reflection of consulting intellect...

On one hand, "success from a Big 4 acquisition perspective... brought in revenue.... opened relationships to upstream work... led to bigger transformation projects... "
On the other, "TO is high at partner levels... Brand deterioration was severe... Profitability and long-term value prop remains to be seen.. "
Mate, does your writing even make basic common sense to you when you read it?? Do you constantly contradict yourself, tell clients they should enter a market but also exit it / they should acquire a company but also sell it? Hilarious to say the least

Also, their early stage consideration on divestment is no secret for anyone even remotely involved in the industry or has friends at these firms, are you even in consulting or are you just some student? LMAO - if its the latter, educate yourself using Google mate, you can thank me later

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Most Helpful
Mar 30, 2020

yikes. All you did was resort to ad hominem, credibility attacks, and attacking strawmans... guess this discussion is over

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  • Associate 2 in CorpDev
Mar 31, 2020

Again, another consultant confirming the hypothesis that they can't read / understand basic stuff... stated in discussions above partners for 2 groups left in droves around 2 years, this implies 2x earnings of a single year, because 2 / 1 = 2... mate seriously

Now 3-4 names were discussed above, I won't specifically say if Monitor was among the 2 with partners rushing out the door (you can check on linkedin yourself) but 7 years is meaningless if you're stuck with the monitor logo on your door but monitor ex partners selling clients from their new shop. Not to mention you are now stuck with the cost of monitor Consultants / case managers who can't bring in revenue.

Trying to have a common sense / basic discussion with folks in this industry has been an amazing eye opener.. anyway if you don't get it you just won't get it, carry on lads, back to your slides..

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  • Analyst 1 in CorpStrat
Mar 31, 2020

Was at Big D and they were definitely able to extract talent from Monitor 10 years out.

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  • Associate 2 in CorpDev
Apr 1, 2020

Insightful comment, well articulated with logic and data - you should be at MBB mate!

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Funniest
Apr 1, 2020

You must be fun to work with.

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  • Analyst 1 in CorpStrat
Apr 1, 2020

Didn't need to be at one to get the same FAANG exit as MBB due to my Monitor projects at Big D :P.

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Apr 16, 2020

Monitor = huge success, consulting boost immediately drove consulting services (higher margin) to over 50% of PwC work, they probably did this the best

Strategy& = allowed them to build out their transaction services group, now has its own offices, deal flow has been insane, also brought them strong presence in energy, O&G, industrials... though tech fell off a bit

EY-Parthenon = Have continued to corner middle market PE because of Parthenon's legacy business, has been good international exposure

All have initial turnover. These "firms" post-acquisition lose prestige because the new equity owners have other things in mind for them. You are thinking about this at the level of the acquired firm, not the acquirer. Maybe they haven't been a success for the acquired, but who cares, those people don't own the business, it's not up to them anymore. For the larger company, they've all been great.

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Mar 30, 2020

Attempts to build capability by acquiring tier 2 firms has not worked out for the others

That's just not true at all and I wonder how you're measuring that. Booz, Monitor Group, and Parthenon have all turned out to have been great acquisitions. Of course they had some growing pains / initial turnover, pretty much every acquisition ever does.

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Mar 28, 2020

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.

Mar 28, 2020

Is LEK that CDD exposed compared to others? Surely this would be hitting PEY too no? They're a big CDD player

Mar 28, 2020

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

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Mar 28, 2020

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.

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  • Intern in IB - Gen
Mar 28, 2020

Heard LEK internships canceled. Can anyone verify this?

Apr 2, 2020

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.

  • Analyst 1 in Other
Apr 2, 2020

Bain is also about 50% DD work. Are they going to get wrecked now too then?

Apr 2, 2020

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-...) 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).

Array

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  • Works at Bain & Company
Apr 2, 2020

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.

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Apr 3, 2020
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