SUN TIMES COLUMN 264

5/16/07 draft for 5/22 edition



FED PRESSURES ON CONSULTANTS

BRING BONANZA TO CLARK- WAMBERG



By Ted Pincus



It’s eternally fascinating to watch the way squeezes upon one segment of an industry can, like compressing a tube of toothpaste, create a bonanza at the other end.

Perhaps nowhere is this as pronounced in recent times as in the corporate services and consulting arena, where the sanctification mandated by Sarbanes-Oxley and other decrees have produced an almost puritanical atmosphere. The latest shift is being ignited by California Congressman Henry Waxman’s crusading investigation of the potential conflicts of interest in executive compensation consulting. In a nutshell, his thesis is that the folks who are advising a bigwig’s directors about his mega-salary,perks and severance package should not be the same folks hired to provide the massive outsourcing services of actuarial,benefits administration and other HR consulting. Why? Simply because of the temptation created by leverage. Couldn’t your judgment on what the boss should take home be a bit colored by a gigantic HR contract you enjoy with the same company? Color it purple—for plum.

Given the choice of shedding executive compensation consulting which might be earning $250,000 yearly, or your humongous HR services contract worth millions, which would you sacrifice? It’s a question that some of the giants like Hewitt, Mercer, Towers Perrin, and others may have to face.

Like the era four years ago when the big accounting firms had to peel off their consulting divisions, this new wrinkle may be touching off a windfall for the independent consultants specializing in comp. One prime beneficiary is Chicago’s Tom Wamberg, whose phone this week is ringing off the hook. “Hundreds of companies are suddenly awakening to Congressman Waxman’s alarm about a perceived conflict of interest in that sector and are seeking independents with no connections,” says the 54-year-old CEO of Clark-Wamberg Consulting.

The gusher of business couldn’t have come at a more propitious moment because just last November Wamberg orchestrated the merger of his Clark Consulting (formerly NYSE: CLK) with the giant Dutch insurance conglomerate AEGON. It was a happy deal all the way around., with Clark shareholders winning a 42 percent premium above the market, while Wamberg and some Chicago investors bought some of the consulting units for $55 million and established Clark-Wamberg in Barrington. Crown jewel among those is the Pearl Meyer Group, a leading independent specialist in comp. From six offices across the U.S., it serves more than 500 companies in that single capacity, with the latest client being one of the nation’s major telephone companies that just switched to Meyer. “With the wave of divestitures we see coming, there may be unprecedented acquisition opportunities for Meyer to be there as a ready buyer, “ Wamberg tells me this week.

With 450 employees at his new enterprise and current volume of $112 million, Wamberg sees growth in varied avenues. Another Clark unit he kept was Federal Policy Group, a registered lobbying firm in the federal taxation niche, serving 80 clients that include GM,GE,Deere and Caterpillar. Then there’s Clark Benson, a financial planning firm that is in the process of acquiring several others in a roll-up. There’s Clark Strategic Advisors, specialists in alternative investments, currently establishing a new hedge fund geared for the banking industry. Its 15 Chartered Financial Analysts on staff seek non-traditional vehicles for endowment funds and other institutional investors. The heads of each of these and other original Clark units remained on board as Wamberg moved the enterprise.

Wamberg terms himself a true contrarian in today’s services sector, where synergy is the holy grail. “We have virtually no cross selling among our diverse businesses,” he says “and that’s both our misfortune and good luck. By serving separate sets of clients our people can consult with pure objectivity, not influenced by other obligations. We think this role will help us double in size in the next five years.”

Paradoxically, in these times of conflict paranoia, that may be a pleasant perch.

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