Gartner Wants to Change Its Tint: From Azure to Blue
January 7, 2017
Is it possible for a mid tier consulting firm to change into a blue chip firm with a splurge of money, stock, and PR?
The idea is that there is a hierarchy of consulting firms. At the top are outfits like McKinsey, Bain, BCG, SRI, and a handful of others are blue chip outfits. These outfits deliver the blue ribbon winning bacon to their clients. Then at the bottom of the hierarchy are the drab gray chips held by former middle school teachers and unemployed journalists who embrace freelance consulting. You can find some of these folks at search engine optimization conferences or via gig Web sites. In the middle are consulting firms which are generating revenue and have some clients. These outfits either try to move up to the blue chip sector and compete head to head with the blue chip folks. or they are drifting down to Fiverr.com territory where “services” begin at $5 per job. In the middle are the azure chip outfits. Many of these firms purveying expertise embrace LinkedIn and do their best to become the talk of the town. The talking heads on many TV news programs come from the azure chip brigade.
Why are the color thing and the consulting hierarchy relevant?
Gartner Group, if the information in “IT Research Firm Gartner Is Buying CEB for $2.6 Billion” is on the money, is making a beeline to the paint store. From azure to blue chip with a bit of cash and Moxie.
The write up points out that Gartner is paying $2.6 billion for a services firm. I learned:
Gartner is offering $54 in cash and 0.2284 of its shares for each CEB share. The deal represents a premium of about 25 percent to CEB’s Wednesday close. CEB’s shares were up 16.4 percent at $72.05 in premarket trading, below the implied offer price of $77.25 per share. Gartner’s shares, which closed at $101.79 on Wednesday, were untraded.
Well, that’s a bit underwhelming for shareholders. “Untraded.” Hmmm.
The Washington Post reported that one CEB executive was “excited” by the deal. The CEB top dog is heading for the kennel. The Post noted:
CEB has grown more slowly than Gartner recently, making some investors worry whether the combined company can maintain the double-digit revenue growth rates Gartner has boasted in recent years.
What happens if more of the CEB professionals check out?
Will the respray deliver the growth and revenue Gartner desires? I have no crystal ball, but if there are some show dogs at CEB, why not see if the McKinsey- or Booz Allen-type outfits are hiring. More money and maybe more prestige?
The big question for me is the new blue chip paint going to hold up in the tough business climate?
Stephen E Arnold, January 7, 2017
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