(News Bulletin 247) – The consulting firm Wavestone unveiled the results of its 2022/23 financial year, ending March 31, at the end of May, which allowed it to reaffirm its growth objectives. This publication was an opportunity to discuss with Pascal Imbert, its CEO and founder, the current health of the market as well as the major hot topic of the moment, the emergence of artificial intelligence.

News Bulletin 247: Your annual results have been well received on the stock market. To what do you attribute this favorable reaction?

Pascal Imbert: According to the various feedback I have had with investors and financial analysts, these are above all our prospects for the 2023/24 financial year – namely the pursuit of a good level of organic growth at least equal to 7% with a current operating margin of around 15% – which pleasantly surprised the market. As our sector enters a period that promises to be more delicate, many of our competitors tend to be more cautious. On the contrary, our outlook shows a certain degree of confidence.

CF: Don’t you think you have also benefited from the recent craze around technology stocks, and more particularly those most exposed to artificial intelligence (AI)?

PI: No doubt, even if it is still too early to know if AI constitutes a real opportunity in the long term, or on the contrary a threat. Be that as it may, in the next two or three years, it is certain that this technological breakthrough will represent a tremendous opportunity for a company like Wavestone. It is obvious that generative AI can enable our customers to optimize their operational processes or provide a better experience for their own customers. Furthermore, with the rise of this technology, a new ecosystem will also appear which will pose a whole series of problems in terms of cybersecurity, protection of personal data and ethics: this is good, because these are areas in which we enjoy strong skills and an excellent reputation.

CF: And what are the risk factors?

PI: In the medium term, we are going to have to remain vigilant so that our offer does not remain focused on subjects which, in the long term, could find themselves reduced to the rank of commodities, even if this only concerns, from my point of view, a very small part of our activities. What is obvious is that AI will change the landscape of consulting services. We will therefore have to add the right tools to our consultants’ briefcases in order to ensure that their contribution of value and their effectiveness remain indisputable.

CF: Some technology groups no longer hesitate to integrate AI into their business model. Does this approach make sense?

PI: The essence of the consulting business is to bring added value to our clients. The important thing is less to operate a change of ‘business model’ than to start a real work of redesigning our tools and our approaches to continue to bring the same level of value. For example, consulting firms have been frequently called upon in recent years by financial institutions for remediation assignments when cases of non-compliance with regulatory requirements appear. This work involved handling a large amount of information and documents, a process that is time-consuming and repetitive. We already use machine learning or analytical solutions to help us with this type of task, but the emergence of AI is making the need to hire a consulting firm all but disappear. Our function will henceforth be limited to helping customers equip themselves with products allowing them to become completely independent on these issues, which will necessarily impact our business.

CF: Due to the nature of your business, you are constantly taking the pulse of your customers’ business. With the specter of recession, have you noticed a reversal in their spending plans?

PI: We do not feel that we are in a crisis situation, even if we observe slowdowns in certain sectors and, more generally, more caution when incurring expenses. We are seeing an upsurge in so-called ‘defensive’ investments, which allow companies to preserve margins, to the detriment of more aggressive development projects that may relate, among other things, to the development of new businesses. This change in the physiognomy of the projects is accompanied by a greater wait-and-see attitude. At the sector level, energy and luxury are in sparkling form and demand in insurance remains strong. On the other hand, other sectors such as industry are undeniably going through a more complicated patch, with clouds that continue to accumulate on the horizon. This is also the case for banking, whose environment is becoming less buoyant.

CF: You also have explicit objectives in terms of mergers and acquisitions (M&A)….

PI: Our strategic ambition for the coming years is to acquire international stature. The share of our turnover generated outside France is only 20% today. We remain very focused on the French market, which presents a brake on our development: our clients are often large multinationals with a strong influence abroad and the fact of appearing as a firm very focused on France may seem disabling. The expansion of our international footprint involves two priority objectives: the United Kingdom, a market in which we have grown considerably recently and where we are successful, and the United States, where we have every intention of taking off in the coming years.

CF: What about a more transformative operation?

PI: We know that well-executed mergers of equals can change the size of a business. The acquisition of Kurt Salmon in 2016 enabled us to create a lot of value. We keep this type of operation on the radar, while being well aware that the number of potential candidates remains limited. Moreover, not everyone is open to reconciliations of this type. But conversations have been started in this direction and I hope that they can materialize by 2025. If a similar opportunity were to arise, we would not hesitate to seize it!

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