Swimming with sharks: When small firms seek safety among the great whites

By Julie Ahadi.

Next time you are at home, snuggled up on the sofa with the lights off watching shark documentaries (just your average weekend in my house), wait for a close up of a shark gliding through the ocean. At some point, you will notice that these fearsome creatures are anything but solitary– they have constant company. Little pilot fish (measuring about 60cms) swim, cocky as you like, alongside menacing jaws, safe in the knowledge that there’ll be a constant meal on offer (in the form of small pieces of food from the shark’s teeth) and the kind of protection guarantee that most sea life could only dream of. For their part, sharks get life-long free dentistry (which is really important when you’re a shark). In biology terms, it’s what’s known as a “mutualist” relationship, where different species work together and each benefit.

We’re increasingly seeing the same phenomenon within the consulting industry; more and more, big and small firms are swimming together and benefitting from working with each other. Unlike pilot fish, however, who have a relatively predictable and safe future hitching a ride on a great white, the fate of the small consulting firms that opts for a similar alliance with a much larger counterpart is far less certain.

Just as the shark gives the pilot fish access to exciting new food options it could never hope to manage on its own (you’ll certainly never see a pilot fish take down a seal), a small firm swimming alongside a large partner will often gain access to big-name clients and deep pockets that would otherwise be out of its league. Meanwhile, the big consulting firm gets its fix, too; it can access the expertise it requires externally, bypassing the need to expand. The bigger the variety of expertise available to the firm, the greater its appeal to a wider array of clients, and thus its ability to chomp away at market share is greatly enhanced.

So far, so good - the mutualist relationship seems to be working. There is, however, an existential threat looming for the small firms in this equation: You never know when the shark might decide to eat you. Granted, for the small consultancy, being eaten is not as dire a prospect as it is for the pilot fish. After all, being acquired by a major firm isn’t necessarily game over, and every now and then you hear a tale of a small firm continuing to live on happily under the larger firm’s umbrella, enjoying all the benefits of mutualism while continuing to exist as a distinct entity with a distinct culture. It happens, but there are no guarantees: Even if a small firm is lucky (or well thought of) enough to keep its own brand at the start, the arrangement rarely lasts, and our little pilot fish firm is typically absorbed into (and indeed digested by) the ravenous shark.

Still, it seems a risk that many small consulting firms are willing to take, and we can’t say we’re too surprised: It’s tough hunting out there for a small fish in a big ocean, and so swimming with the sharks can surely feel like a good bet. After all, life is a lot easier when someone really big and scary has your back.

For more information about M&A in the consulting industry, please click here to download the fourth of our quarterly briefings (covering the UK & Ireland). For anything else related to this article, please contact me on my personal 24-hour hotline: 1-800-SHARKS.