Automotive Consolidation Driving Alliances In Consulting Services

You heard it here first but, frankly, it was quite predictable: the pandemic and subsequent financial hiccups would create winners and losers, with the losers being acquired at a rapid rate (e.g., “… unjumbling ‘coronavirus’ can spell words like ‘carnivorous’…”). Valuations would be attractive, social-distancing Boomers would want to sell and glide into retirement and multi-billion-dollar corporations would snatch up the prizes. Such purchases would typically target intellectual property (IP), brand equity or predicted market growth. According to Bloomberg, Q2, Q3 and Q4 of 2021 were the highest three volumes of mergers and acquisitions (M&A) in the past ten years with such activity finally tapering off in 2023.Automotive consulting has experienced a similar acquisition spree, but for a vastly different reason since IP et al typically don’t apply. The reason: breadth. Monolithic automotive manufacturers and suppliers need global solutions for various consulting needs (e.g., business strategy, engineering efficiency), and given their geographical dispersion and mass there are frequent reasons to have boots on the ground locally in multiple regions. Therein, many times auto companies hire Big Ten consulting firms (e.g., McKinsey, EY-Parthenon, Deloitte) with revenues in the $10-60B range and over 400,000 employees. The hiring customers recognize that the vast majority of those consultants are green, lower-paid, non-automotive graduates, but directors are wooed by “land and expand” strategies and, once again, the consultant’s global reach. Yes, small-to-mid-sized players might have great expertise and better prices, but the geographic coverage pushes Purchasing towards holistic solutions.Therein, the industry has begun to see a trend: alliances. Such agreements between independent, mostly-regional organizations permit localized solutions to share co-market offerings and resources as to garner a seat at the Sourcing Table. “We realized when speaking with Process Fellows that each of our companies could run its separate businesses, but gain the synergies by working in concert at times,” states Scott Tobin, CEO of Envorso. Envorso (a Seattle-based company birthed from automotive and Silicon Valley expertise in 2016) and Process Fellows (a European 2018 start-up founded by well-known experts in Automotive system and software development) announced an alliance this week to provide global solutions around Automotive SPICE®, a standard that reinforces engineering efficiency and rigor.

“Expanding our network and our ability to provide solutions to our global customers made great business sense,” comments Bernhard Sechser, Managing Director and Principal Consultant at Process Fellows GmbH. “We continue to be a German-based company with strong, connected expert employees, but join forces with other experts all over the world when appropriate.”

An ongoing question remains: will acquisitions rise again and either undo or overwhelm such alliances. Bloomberg suggests it probably won’t since “… companies are still contending with economic uncertainties, the aftermath of the mini-banking crisis, and the possible allure of other deal structures like spinoffs.” This is an alliance we knew would be a critical priority, and persist in an economic climate where our customers require a better global solution,” emphasizes Peter Abowd, General Manager of Envorso’s Engineering Excellence.

So, you will have heard it here first again: 2023 may very well shape up to be the year of alliances.

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