Why does a firm need internal department of Corporate Development when there's already consulting firms?

Especially when they can do the job for them just as well if not better. According to my research, keeping an in house corporate development operation is just as costly as seeking consulting services from third parties such as the MBB and the other top consulting firms.

Secondly, I've also noticed that some firms still consult MBB/others when they have an in house corpdev ongoing operation. Why is that? Why do you need someone from outside when you're employing the best professionals who can carry out the assignment just as well. Help me understand?

Comments (5)

Feb 7, 2019

1: Information Control

2: People running it are internal to the firm and have a better understanding of the culture/strategy/etc.

3: It's MUCH cheaper to hire the MBB consultants forced into other jobs due to "up or out" policies than it is just to hire the firm. Upside is you're actually going to get guys with 3 years or so of experience that way vs. the MBB firm staffing some new MBA on your case (who most likely isn't any smarter than your own MBA hires).

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Feb 7, 2019
anachistgt3:

Especially when they can do the job for them just as well if not better. According to my research, keeping an in house corporate development operation is just as costly as seeking consulting services from third parties such as the MBB and the other top consulting firms.

Secondly, I've also noticed that some firms still consult MBB/others when they have an in house corpdev ongoing operation. Why is that? Why do you need someone from outside when you're employing the best professionals who can carry out the assignment just as well. Help me understand?

Your research is wrong. For instance, our in house legal personnel is as little as $40/hr. Our outside legal counsel is $400+/hr plus all expenses.

Feb 7, 2019

Yeah it's this. It's super cheap to have your own internal guys vs hiring consultants. Just hire them as needed is what my firm does. I support the internal Corp. Strat. team and it's like 5 people. So much cheaper than hiring a team... also y'all some expensive mo'fos. I saw a SOW the other day and was like damn I really need to move over there for a year or two.

Feb 7, 2019

Hi,

I am a former consultant and I am currently working in a Corp. Dev. department.

I would say:

  1. Consultants (and bankers) are typcially generalists. They can run some processes and help you with part of the work, but you still need people with broad experience in the industy/segment and people who know very well the firm and the culture.
  2. Consultants and bankers' incentives may not be (always) aligned with the company's objectives.
  3. It is generally cheaper to have an in-house department

Regarding your second question:
Consultants and bankers still add value, because:
1. They are not biased/spoilt by the company's views and/or cultural factors
2. They can create value by bringing some external know-how (they have probably seen many more / other transactions before)
3. They can perform technical/very specific/(some times boring) part of the work (some elements of the commercial and financial due dilligence for example)
Some managers' view:
(4. You have someone to blame for if things go wrong)

Cheers,

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Feb 7, 2019
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