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The Big Four firm is branching into the back end of outsourcing deals.
Sarah Johnson, CFO.com | US
February 25, 2011
KPMG's purchase of EquaTerra, an outsourcing advisory firm, will shrink a cottage industry created over the past decade and expand its ability to help corporate customers close outsourcing deals, according to an analyst who covers the sector.
The Big Four accounting firm announced its intention to buy EquaTerra last week to "create one of the broadest global sourcing and shared services advisory offerings," according to its press release. Terms of the deal were not disclosed.
EquaTerra and its competitors, including TPI and Pace Harmon, help corporate customers with their overall outsourcing strategy, connect them with vendors, and complete the agreements. The advisory firms "essentially own all the intellectual property in the industry, they own all the price points, all the terms and conditions — the legal stuff," says Phil Fersht, CEO of HfS Research, an analyst firm covering global sourcing strategies.
KPMG has been trying to get into that business, but PricewaterhouseCoopers has been more successful, says Fersht. With the acquisition of EquaTerra's employees, KPMG is adding more expertise and placing its stake in the space quicker than if it had continued trying to expand organically.
The acquisition may not necessarily raise the cost of outsourcing deals since competition still exists for this specialized knowledge, notes Fersht. Deloitte is also expanding its services, and two boutique firms, Alsbridge and Everest, offer similar services.
The purchase of EquaTerra could enable KPMG to market itself as a one-stop shop since now it will be able to close outsourcing deals, whereas formerly clients may have wanted to bring in an outside adviser to help seal an outsourcing agreement. Indeed, KPMG said that together, the combined firms "will provide clients with a full life-cycle of capabilities — from strategy through to optimization."