8 October 2017

Ethiopia: HST Acquires Encore, After Divorce With Deloitte

HST Consulting Plc, which recently broke its ties with one of the leading global consultancy firms, Deloitte Leadership, has acquired the local firm Encore Employment, Training & Consultancy Services Plc as of October 1, 2017.

"The acquisition came as a bold move to strengthen our advisory and centre of excellence," reads a press release from HST.

Founded in 2006 by Zekrie Negatu, Getachew Zewdie and Hailu Zeleke, professionals from teaching, training and consulting in management, accounting, finance and development areas, Encore was sold to HST after a two-month long negotiation between the two. The management of both companies declined to disclose the transaction amount.

"The demand from the economy pushed us to associate with HST," said Getachew, co-founder of Encore. "The economy is demanding diversified and advanced advisory services, which cannot be fulfilled as Encore."

The total asset of Encore will be transferred to HST, according to Teshome Bekele, lecturer of International Marketing at Addis Abeba University College of Business & Economics. But the transfer is not mandatory for the human resource as it will be done based on the agreement of the two parties.

The directors of Encore will take similar positions within HST, leading in their specialised service areas. Zekrie will be the director of HST's Corporate Finance Function, Getachew will be the director of Strategy & Innovation Function, and Hailu will be director of Research & Industries Development Function.

"The initiation of acquiring the firm came from us," said Solomon Gizaw, managing director of HST.

HST was established through a merger of Haileleul Tamiru, Solomon Gizaw and Tekeste Gebru with a registered capital of 300,000 Br to provide services such as audit, organisational system and targets operating model design, outsourcing, recruitment, and payroll management. Two years ago, Haileleul left the company, and Getu Jemaneh replaced him.

The new merger will increase the employment base of the company to 145 from the former 125 and currently, it is working on reorganising its structure to launch operations in September 2018.

Before deciding to acquire Encore, HST had been dealing with two more companies, but HST's management resisted from disclosing the name of the two companies.

"We decided to remain strategic partners with one of them, and we will hopefully acquire the other company within a year," Solomon told Fortune. "We aim to bring local brands which are internationally competitive."

The acquisition of the two will bring new phenomenon to the consultancy business of the two companies, according to Teshome.

"In the acquisition, HST will bring its experience with Deloitte and Encore will share its local expertise to the consultancy business of the country," said Teshome.

Deloitte and HST ended their partnership on July 13, 2017, following a disagreement that arose between the two companies over management style. Even though the official break up between the two became official in July, the two were aware of the possible break up by the end of May.

The two partnered in 2012 to provide consultancy and financial assistance as a member of Deloitte Global Network, based in New York engaging in audit, tax, enterprise risk, and financial advisory consultancy services and has a presence in 150 countries with 244,400 staff. Last year, Deloitte recorded a 36.8 billion dollars turnover.

"We departed with Deloitte as they do not have a sustainable operations models, despite having an international management style," said Solomon.

Previously, the pair worked on installing a management strategic plan for the Bank of Abyssinia and conducted a study on the e-government project for the Ministry of Communications & Information Technology (MCIT). Because of their divorce, the company withdrew from two ongoing bids for the management strategies design at Dashen and United banks.

On the other hand, Encore worked on training and consultancy services for United States Agency for International Development (USAID), Ethiopian Chamber of Commerce & Sectoral Association (ECCSA) and projects with HIV AIDS.

Last year, Ernst & Young (EY) and its managing partner for Ethiopia, Zemedeneh Nigatu had also ended the partnership, as Zemedeneh joined Fairfax Africa Funds LLC, a company registered in the US with his name. These moves have made Grant Thornton Ethiopia the only international firm operating in the country through a merger with a local company.

Since 2013, an investment law forbids international firms from opening offices in Ethiopia or partnering with local firms. Months ago, KPMG Consulting attempted to open an office merging with a local firm, but the request was rejected attributing this legislation. Following these PriceWaterhouseCoopers (PwC), McKinsey & Co and KPMG are currently operating in Ethiopia through liaison offices.

"What we would miss from Deloitte is the knowledge sharing project, and we designed an 18-month outline to mitigate this," said Solomon. "The partnership will enable us to work in areas which we have not been engaged in with Deloitte."

HST is planning to launch learning solutions such as corporate and implementation training.

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