An Interview with Peter Allen on the ISG TPI Acquisition

In late April, Information Services Group, Inc., announced that it had agreed to acquire TPI. Following the announcement, the HROA sat down with Peter Allen, Partner and Managing Director, Market Development, for TPI to talk about the deal and what it means for TPI and the industry.

HROA: Tell us about the deal.

Peter Allen: In the sourcing advisory industry, like many, how do you incentivize, attract and retain great people? Generally, that means including them in a mission for greatness, with some kind of equity participation. Intellectual property, research, even some of our services, become table stakes; you've just got to have great people and a reputation for success.

We're fortunate for the opportunities to serve some really fabulous clients - organizations that are driven to improve their business operations through the objective consideration of alternative sourcing models. We're passionate about being expert at this complex set of client challenges.

As a way to address the issue of giving us the tools for attracting and retaining our talented people, TPI took the first big step three years ago by recapitalizing with a private equity firm - Monitor Clipper Partners. Part of the point of going that route was to get some great insight into how we put the pieces into place to become a great global firm, focused on the services that clients will need to drive their change programs, and the resourcing strategy we will need to fulfill those ambitions. At that point, we developed a five-year business plan, with value to employees based on our performance against the five-year plan.

Well, we hit the plan in three years, not five, and it became clear that we needed to position ourselves for the next era.

We looked at several classes of prospective partners.

We considered renewing our deal with Monitor Clipper. They've been a great partner, and they're a known quantity.

We also looked at strategic buyers - including traditional consulting firms. Many are public companies that have strong brands that are well known in the industry. And, there was high interest. The problem was that we've built a lot of equity in the TPI brand - in all that it means to be TPI. If we went to another brand, we'd lose that autonomy.

Private equity firms also were part of our consideration. Again, there was a lot of interest among private equity firms because there's a lot of interest in this segment of the consulting market in general. There wasn't a real obvious way to grant employees stock, and we'd like face the prospect of doing another recapitalization in a few years.

Then, along came the perfect solution in the form of Information Services Group. ISG is an equity firm that was already public, and had funding to acquire us. More to the point, they had the vision to build a great, global information-based services business. This turned out to be the perfect fit for us because:

• They're a public company already, which provides us the opportunity for our employees to participate in a marketable stock, a key factor to retaining them.
• There's a high "get it" factor with them - they really understand our business for what is, not strictly as an investment.
• The have a bent and platform for growth, and they're acquisitive and provide the opportunity to roll in other organizations.
• They intend to augment our offering with products and services we don't currently offer.
• We can retain our brand, which is important to our people and our clients.

HROA: What's been your biggest anxiety about the transition?

Peter Allen: Because of the characteristics of ISG previously mentioned, we don't have any true anxiety about the transition. Of course, our top concerns are always our people and our clients. But not one employee has left us since we've announced this deal.

And we have retained all our clients, many of whom have had the opportunity to meet and get to know ISG. There's a real energy, a real excitement over what we're doing.

If anybody's expressed some concern about the deal, it's the service providers. The service providers are concerned we may be asked [by ISG] to violate our sacred principles. But I can tell you, ISG has not asked us to do anything at all that would violate our clients' or partners' trust.

HROA: What will it take to make the deal successful for TPI?

Peter Allen: Ultimately, success will mean getting the deal done seamlessly and demonstrating the benefits to the industry and our employees.

We need to leverage this opportunity by thinking ahead to future acquisitions. We're specifically looking to other locations, such as China. We're also looking at line extensions - new services our clients wish our industry would offer.

And we need to make sure the service providers see what's in it for them - to keep innovating for them.

Last, we need to retain the high level of passion that is TPI.

HROA: Does this foretell consolidation in the sourcing advisory market?

Peter Allen: The sourcing advisory market is a great business to demonstrate our "trusted advisory role" to our clients. We are always interested in how we can continue to complement the largest and most recognized sourcing advisory team at TPI and looking to acquisitions to help us fulfill client needs will be one source we will consider in the months ahead. In our case it won't be until after the fourth quarter 2007 [when the deal is finalized], but we have a real platform to go after acquisitions, so we'll certainly pursue them.

And it's not just ISG. The strategic partners whom we spoke with won't go away. They're acquisitive, so I think there's a real likelihood of combinations.

If you look at the landscape, TPI is two to three times as large as our nearest competitor, so it's not unlikely that there may be some other combinations created.

HROA: What does that mean for buyers?

Peter Allen: We've really spent a lot of time looking at that issue. We have buyers asking us those exact kinds of questions: "Why are fewer choices good for us?"

Buyers choose their "trusted advisors" with great care and we believe at TPI that we have the most experienced, most trusted resources to bring to bear to help our clients win in the marketplace and buyers will be well-served in they choose the industry leader.  Clearly, that's what's motivating us.

We think this change will really drive innovation in the industry. For example, when we're out in the market, we hear a lot from the buyers that the market is increasingly commoditized. Buyers think the lack of partnership in the market is caused because providers, advisors, and lawyers aren't looking at the best interests of the buyer. The work we've done as part of this deal, and over the past year, has been a real learning event for us. We've realized we can drive innovation.

Also, we believe larger organizations can drive innovation better than several smaller organizations in a fractured industry.

And finally, we think this kind of organization attracts great people. We never lose site of the fact that our employees are our real asset, and they are the greatest benefit to our clients.