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Using M&A to get in the room where it happens

Earlier this month, Wipro made waves by announcing its acquisition of Capco, the financial services specialists, for $1.45bn. Wipro has gone to some length to lay out its own rationale for the deal to investors and I’m not especially interested in undermining that thinking, even if the markets haven’t shown an enormous amount of positivity so far. Rather, I want to think about acquisitions as statements of intent, as very expensive megaphones.

At Source, we interview large numbers of senior buyers of consulting, who work around the world and across sectors. Especially as the effects of the pandemic have moved from acute to chronic, we’ve heard increasingly converging sentiments: Now, more than ever, is the time for the familiar brand, the trusted partner who saw you through the last crisis and will now always be your first call.

This flight to trusted brands puts consulting firms in a tough spot, especially those trying to reposition themselves—how do they reach the mature buyer, potentially even ex-consultant, who has their preferred firms and has neatly filed away all the others? The kind of clients who are immune to your sponsorship of an entire travelator or the stats of a tennis tournament, or who simply use your thought leadership as material to continue to talk to their existing consulting relationships.

And so, we come to M&A and its power to alter a firm’s positioning. In thinking about this, I’m far more interested in its seductive, theoretical impact than the cold reality that many acquisitions—whether in professional services or elsewhere—simply don’t work. Firms still plough their millions into the next acquisition because the next time could be different and because it’s a demonstration of intent. Whether it ends up making a fundamental difference to the capabilities that really get brought to bear on the average engagement is almost beside the point; it gives the acquirer new narrative options.

And if it’s the spending of money itself that makes the story, does spending $1.45bn get you a bigger, bolder headline, one that lingers slightly longer on a homepage or in the minds of potential buyers, who might have their preconceptions shaken just enough to think again about who could win their next piece of digital transformation work in financial services?