ISG buys Alsbridge: who's next?

ISG, one of the most acquisitive players in the analyst market, has announced its purchase of Alsbridge, an influential sourcing consultancy that acts as a third party advisor to buyers. The purchase reinforces rather than transforms ISG's market position, but offers a few clues about ISG's next purchases and its eye on the US market. The most enthusiastic reaction so far, by HfS Research CEO Phil Fersht is worth reading not only for its precise analysis but also for the subtext that HfS and its peers might be the next to be bought. We also think Alsbridge's customers will react positively, since those of them who use ISG rate its influence more highly than ISG's other clients.

ISG and Alsbridge have a lot in common. Awareness of the firms is similarly high on the demand side and supply side, although ISG is three of four times better known in most vertical markets. Across the dozen vertical markets tracked by the Analyst Value Survey, the firms share the same four priorities: Banking and securities; healthcare; insurance and manufacturing. Alsbridge has, in addition to more valuable service, a deeper reputation in banking and a particular strength in transportation and insurance. The main difference is that while ISG has a rather typical global spread, with a rough balance between Europe and the Americas, Alsbridge has much more focus on North America, with minimal credibility in developing markets (such as Latin America, the Middle East and Africa). Even so, the fit is so substantial that ISG, alongside Deloitte, was one of the most logical buyers for Alsbridge.

From an operational point of view, ISG's priority is probably to strip our overheads from Alsbridge while using its global research to cross-sell Alsbridge and ISG consulting services to more of its current clients. There is, however, a further advantage. Although it's smaller, Alsbridge's clients find several capacities to be notably more valuable than ISG's, most notably its ability to drive business growth and its high-quality advisory sessions. That could help ISG to see how to sell more of its core consulting services. On the other hand, ISG's providing some opportunities for clients to connect with each other: Alsbridge could usefully learn how to facilitate that without being disintermediated. 

What's next for the ISG M&A team? Using the same approach of finding research fit with North American expansion and content businesses which allow ISG to grow its consulting engine, the obvious targets are Everest Group, HfS Research, IDC, and NelsonHall. Of these, IDC and Everest would certainly be the hardest brands to acquire. IDC is a huge firm, but a leveraged buy-in is feasible and our April Fool's post about a Chinese buyer might turn out to be prescient. Everest would also stretch ISG's pocket, but it would remove competitive pressure on the combined ISG and Alsbridge. In particular, ISG's broader research scope could help Everest to improve its somewhat inconsistent research quality. HfS Research might be an affordable purchase, although its leaders will bargain hard. HfS would greatly benefit from the scale of investment that is beyond that firm's current owners' appetite. NelsonHall might be the easiest purchase since few strategic opportunities are being explored to take that firm further.

For more insight into movers and shakers in the analyst industry, check out the Analyst Value Survey.