The Next Level of Service Integration for Mergers and Acquisitions Projects

Point of View #06 - Q2.2007   The French Post Merger Integration Market: Estimated Size & Distribution

 

 

 

The PMI market is not as mature as in the UK or the US. It is however a significant market for advisory services, as described below. We include in this market the cross-border and domestic transactions involving a French firm.

 

Globally, we estimate the "French" PMI Market to represent between 1,500 and 2,500 Euro mio. This is to be compared to the size of the M&A market (cf. POV#3).

 

This market is split between a number of players belonging to different sectors. The table below provides an overview of each market segment's size. The most important share of this business is taken by IT firms.

 

€ mio	Market estimate (min-Max)	Comments
Strategy Boutiques	300-500	The global strategy consulting firms account for c.2/3rd of the total. The rest is very fragmented between small domestic consultancies. Pure programme office support accounts for c.50-100 mio Euros, the rest being workstream support (eg. marketing & sales integration, supply chain optimisation, site rationalisation,...)
Audit and Law Firms	300-500	A limited part of it is on pure PMI project management (50-100 mio). The most important part relates to the finance workstream management (250-400 mio) and other finance-related aspects.
IT Firms	600-1,000	A limited percentage of it is on overall programme management (150 to 200 mio Euros). The bulk of it is on IT integration-related projects (450 to 700 mio Euros).
Others	300-500	This covers operational and functional advisory services which may be activated at programme office (50-100mio) or workstream level (250-400mio) : communication, branding, HR, EHS, real estate, ...
Total	1,500 - 2,500	Globally, programme office related expenditure are estimated at c.300-500mio, the rest being at workstream level.

 

Note: PMI Factory estimates, based on our knowledge of the turnover and teams of key players.

 

Use of PMI Advisory Services should develop for smaller deals:

• The French economy is very fragmented compared to the German one. While major listed groups will continue to improve their international networks, the M&A and PMI market should experience a boom in the mid-size segment (from €100m to €500m turnover).
• In the UK, a ratio of 1 ODD (Operational Due Diligence) per 2 Financial Due Diligence is considered as a normal ratio in an audit firm. In France, integration planning is often achieved internally in mid-size transactions. This will change.

 

 Conclusions - Recommendations.

 

The post-merger integration market is an important one rarely estimated. On the basis of an avg. K500€ annual revenue per consultant, it represents c.5,000 FTE's working on such issues. The biggest share of the overall budget spent is on IT aspects, which explains why leading IT companies have structured a PMI practice or center of excellence. It is also why most strategy "boutiques" have developped IT capabilities. We anticipate some evolution in this distribution:

• The normal competition between acquirors should tend to increase over the long term the complexity of deals - this plays in favor of a global stability of the budget spent as a percentage of deal value.
• As of the distribution of this budget, we anticipate implementation costs to grow at workstream level, programme office costs remaining stable due to increased standardisation of approach and use of NICT's.

 

 

Author: Gilles Ourvoie (gilles.ourvoie@pmifactory.com).

Gilles has worked for c.15 years on strategy and PMI projects for major international groups. Within the Strategy & Transformation consulting activity, he has developped the French PMI Center of Excellence at Gemini Consulting and Capgemini (1997-2004). Between 2004 and 2007, he has launched the Transaction Integration Services practice of Ernst & Young France (within the TAS Corporate Finance), and in the CWEA Area (Italy, Spain, Belgium). As such, he was part of the TIS Global Leadership Team. Since 2007, Gilles is Partner at PMI Factory.