M&A is booming in TMT—but what does the future hold for consultants?

By Alison Huntington M&A is one of the issues a client is most likely to pick up the phone to a consulting firm about, and luckily for TMT consultants, there’s been a huge amount of it across the industry. 2014 saw deals hit their highest level since before the financial crisis, creating lots of opportunities for consultants in pre- and post-merger integration work, and in due diligence. A key driver behind the spike in activity is clients’ recognition that they need to explore all options to remain relevant in the marketplace of the future. Rather than relying solely on organically-generated innovation for the next big thing, many are looking to buy start-ups, merge with other major companies, or sell off parts of their businesses that don’t quite fit anymore. It’s great news for consultants in the high-tech and media sectors—high-tech is booming, and the fragmented nature of the media market means that consolidation is good for consultants not just because M&A creates work in itself, but also because it leads to bigger companies with a greater capacity to buy large amounts of consulting. There was an uptick in M&A in the telecoms sector too. Clients here are driven by the same exciting stuff about securing their future relevance in the market, but along with that, there’s also something more mundane: economies of scale. Telecoms clients are seeking to share the burden of rising costs as margins get ever tighter; combining infrastructure, functions, and pooling customers is an attractive option, and no doubt generates plenty of consulting opportunities in making it happen. There’s another difference between telecoms and the rest of TMT, too: what it means for consulting. While consultants may be enjoying the fruits of high M&A activity now, they also know that the number of clients available to work with shrinks with every merger. It’s not so much of an issue in the diversified sectors of high-tech and media, but for the telecoms industry—already consolidated into two or three major players in most markets—it has a much greater effect in shrinking the number of clients around for a consulting firm to work with. In Europe at least, consultants could see a brake on M&A activity: a recent deal between Telenor and TeliaSonera was abandoned in Denmark after the EU’s competition chief stood against the merger on the grounds that further consolidation would probably be worse for customers. While it may endanger juicy deals—and the consulting work around them—in the short term, consultants may well benefit in the long run from a slowing of M&A due to the simple fact that more potential clients will remain in the market.