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06/26/2013

"Conflicts are programmed"

The consulting market is increasingly being changed due to major audit firms acquiring purchase consultancies. TECHNIK+EINKAUF talked to Gerd Kerkhoff, Managing Director of Kerkhoff Consulting, about the development in purchase consulting.

 
 
Mr. Kerkhoff, for some time now, you have been observing audit firms buying up purchase consultancies. In your opinion, what's behind that?

Kerkhoff: First of all, it must be said that major audit firms buy up not only consultancies in the fields of purchasing and the supply chain but also consulting firms specializing in other business areas. TellSell Consulting, for example, is one of the hidden champions in the sales area and has been taken over by KPMG. That means major audit firms are taking over small and medium-sized consultancies which have a clear profile and stand for specific topics or subject areas.

What is the objective of these acquisitions?

Kerkhoff: Audit firms want to gain a foothold or establish an additional pillar in the classic management consulting business. This is rather difficult to achieve through organic growth and that's why brands and companies are deliberately acquired. Actually, it's their entry into the classic consulting business which has so far been covered by Roland Berger, Boston, McKinsey and others.

How do small and medium-sized purchase consultancies fit in?

Kerkhoff: When a management consulting business is set up, there are various disciplines, one of which is purchasing and the supply chain. Expertise and relevant business size are purchased additionally so that it will be possible to handle and realize projects in this segment.

What does that mean for clients of purchase consultancies?

Kerkhoff: The change will not only be in the name behind the management consultancy specializing in purchasing but, much more particularly, there will be changes in the corporate culture of the consultants. Formerly owner-managed consultancies with a manageable number of employees will now become part of a multinational group which, due to the orientation of an audit firm, will represent divergent interests within the group.

And that will harbor potential conflicts?

Kerkhoff: I think that's a major conflict. When you retain a law firm, for example, the first thing to be checked is whether there are any possible collision problems. The question will be: Don't you have a collision of interest problem if a tax consultancy with an affiliated management consulting firm is working for a client on the purchasing side and will then negotiate with suppliers who are, however, also its own clients so to speak. That's not exactly instilling trust and confidence.

Wouldn't that result in a major conflict of interest within the audit firms?

Kerkhoff: Of course. On the one hand, the client is to be provided with consulting services in purchasing. On the other hand, due to the auditing process at the supplier's, its complete figures are on hand in detail – beginning with margins and going all the way to profit contributions. If you will, that's a hundred percent financial overview with the auditing client. If the supplier is then pressured due to negotiations with purchasing, I doubt that the supplier would not call in question the Chinese walls in the audit firms which, by rights, ought to exist between the audit firm and the consultancy. At the same time, these conditions will render it difficult to realize maximum economic potentials for the client (purchasing).

For you as a management consultancy specialized in purchasing, how is the market changing?

Kerkhoff: I don't see the big audit firms as major competitors – but that's what the independent purchase consultancies had actually been. So for us, competition has been minimized and our market position has strengthened. Above all because the major firms are not as SMB-compatible as we are.

Author: Kathrin Irmer