Huron Consulting (NASDAQ: HURN) is a consulting firm speicalizing in financial analysis for M&A transactions and liability analysis for legal disputes. The firm also provides clients with operational consulting services aimed at helping them to reduce costs. Huron works with a broad range of clients including Fortune 500 companies and 50 of the largest US law firms.
Huron provides services through two segments: Financial Consulting and Operational Consulting. Huron's clients include corporations, law firms, academic institutions, health care organizations, and government entities.
Consultants in this practice provide economic and financial analysis and expert testimony regarding issues that arise from litigation, business disputes, and governmental regulations. Consultants also perform valuations on assets and transactions, and serve as interim management for distressed hospital systems.
Consultants in this practice aim to help clients improve the overall efficiency and effectiveness of operations by enhancing revenue, reducing costs, and managing regulatory compliance. Huron seeks to understand each client's unique situation and thus give tailored advisory services to generate sustainable results. This segment can be further broken up into the following: Legal Consulting, Health and Education Consulting, and Corporate Consulting.
Huron's strong revenue growth is attributable to the depth and breadth of its client relationships, the non-discretionary nature of its advisory services, and the firm's ability to maintain steady billing rates while rapidly growing its consultant headcount.
Huron is a leading provider of consulting services within the Health Care industry. Huron has provided services to 50% of the nation's largest Health Care systems, and strengthened this practice with the acquisition of Aegis Advisors, a strategic consulting firm focused specifically on advising healthcare providers. The constant changes in rules and regulations surrounding Health Care administration, including rising insurance premiums and the increasing number of uninsured citizens, has driven demand for Huron's services, and continued challenges in this industry will positively affect Huron's results.
The heightened focus on corporate mismanagement, fraud-related investigations (following the Enron and WorldCom scandals), and ongoing SEC regulatory activity drive demand for external advisory services. The volume of this activity, along with litigation arising from business disputes, does not necessarily correlate with the economic cycle. Specifically, Huron's legal consultants have seen consistent demand as these conditions require firms to focus on better managing risks in the litigation process.
The increasing globalization of the economy drives business consolidations and compliance requirements. Multinational firms are seeking to establish global footprints and expect consulting firms to assist them along the way. Globalization stands to generate increased demand for external advisory services, although Huron currently has no material international presence. Huron faces significant challenges in building an international platform, but it nonetheless represents a significant growth opportunity for the firm.
The consulting industry is loosely divided into four categories that feature highly fragmented competitive landscapes:
Huron's closest peers are the independent consulting firms that provide similar financial and operational consulting services to many of the same clients. As the "Big 4" accounting firms continue to bleed market share in the financial and operating consulting market, a tremendous opportunity exists to become the dominant provider of these advisory services. This market has several unique characteristics:
Demand for financial and operational consulting services is non-cyclical and has shown no signs of slowing down. Thus, the key determinant of these firms' future success is their ability to contain costs, especially costs related to consultant hiring, compensation, and retention. These firms operate under two distinct organizational structures that determine how consultants are paid: