Charles Harper, Big4.com
July 12, 2010
More than a year ago, on March 25, 2009, we wrote about the imminent breakup of BearingPoint with business assets being sold to various Big Four firms and to BearingPoint Europe management (http://bigfouralumni.blogspot.com/2009/03/bearingpoint-breakup-imminent-business.html).
We said then, “BearingPoint and Deloitte have entered into an asset purchase agreement by which Deloitte will purchase a significant portion of BearingPoint’s largest business unit, Public Services, for a price of $350 million, subject to adjustment and customary closing conditions. “
We also surmised, “… The Public Services unit was strong and had good inroads into government consulting projects, Deloitte will certainly strengthen its government consulting business. Consider that Public Services had revenues of $1.4 billion in 2007 and gross profits of $263 million, so the sale price is only 1.5X gross profit.”
After a year or so, it appears according to a great article in The Washington Post by Marjorie Censer ( http://www.washingtonpost.com/wp-dyn/content/article/2010/06/25/AR2010062504342.html), things are looking quite well.
Deloitte did purchase the federal government consulting service business from BearingPoint after its bankruptcy in March 2009 and now reports $1.65 Billion in revenues, up from $1.43 Billion a year ago, a solid increase of $220 million in revenues or over 15% on the top line.
And The Washington Post reports that Deloitte is actually hiring, and doing so with enthusiasm, saying “This past year, Deloitte hired close to 1,400 people, and the firm is now planning to add 160 to 170 more per month. In particular, Deloitte is ramping up its cyber and health-care work. For instance, says the Post, the company nearly doubled its recruiters to meet its hiring demands.
Also, in the classic M&A analysis of pre-merger intersections of competencies, the customer and capabilities base has also expanded. Deloitte brings to the table an extensive array of audit, tax and Deloitte consulting services, but BearingPoint (the erstwhile KPMG Federal Services) has access to a larger set of clients, owing to its 35 years in the federal business.
Mr. Robin Lineberger, who was the prior head of BearingPoint’s public service practice is now chief at Deloitte’s federal government services business. And physically, the two companies are combined, bringing all consultants together at Deloitte in 5 1/2 floors in the Corporate Executive Board’s Rosslyn facility, having emptied BearingPoint’s former headquarters in McLean, Virginia.
Though just a few issues remain, according to the Post: 1) BearingPoint and Deloitte are still working through getting team and employee issues sufficiently integrated; 2) The companies are still working through legal issues associated with the merger; and 3) The companies are still in “need to hire aggressively” frame of operation, indicating that even if integrations were complete the unit still does not have enough people to do the job.
Uncle Sam is doing his bit by continuing to offer a proliferation of agencies, new regulations, stimulus packages and social media initiatives – all fodder for the consulting industry.
Consider also that Booz Allen Hamilton, which provides similar federal consulting services, is feeling strong enough to seek the Initial Public Offering market, and confident in going public, despite a tepid stock market. See our blog post on this – http://www.big4.com/?page=blog_item&url=you-can-shortly-own-a-piece-of-booz-570
Certainly there are all indications that continued and increased demand for federal consulting work does exist – what great news for federal consultants! Once considered less sexy and profitable than strategy consulting, federal consulting is certainly back in the limelight.
And for Deloitte and BearingPoint, it appears that the intended synergies are working out close to expectations at the beginning of the deal. And any company that is hiring these days makes for a good story and a happy ending.
Deloitte, BearingPoint, Federal Consulting, revenues, Lineberger, consulting, synergies, acquisition