Economic Consulting Practice Areas

Economic consulting firms usually specialize in core practice areas in the beginning, but eventually diversify into many practice areas as the firms get bigger. This is observable in that most of the older firms like NERA, CRA and Analysis Group have well established practice across different areas like Antitrust, Financial and Securities litigation, mergers and acquisitions, intellectual property and many more. While most of the older economic consulting firms engage in multiple practice areas, the younger firms prefer to stick with specific practice areas. This helps them specialize as well, and to establish client relations that they can build on in the future.

We will try and get an understanding of some of these major practice areas. Although this is not an exhaustive list of practice areas for economic consultancies, this will give you a good idea of the kind of work that economic consultancies dabble in.

Antitrust and Competition

All companies are subject to antitrust laws, which are laws put in place to prevent any company bypasses economic competition (by forming a cartel with other companies, or by abusing its dominant position). When the company breaks these laws, it almost always harms the consumers directly or indirectly. Antitrust and Competition practice involves these cases. Where the market competition was curtailed by anti-competitive means (which need not be always illegal which is a more complex topic to discuss), economic consulting firms help law firms argue the case for the plaintiffs (the consumers) or the defendants (the accused company/companies).

Most of the engagements in the Antitrust and Competition sphere is involved in litigation or regulatory proceedings. In these instances, a firm is put under investigation by a regulatory authority or sued in court by a group of plaintiffs, under the accusation that some of their practices violate these antitrust laws. Economists will be hired by both the defendant and the plaintiffs to establish their point of view.

Mergers & Acquisitions

Mergers & Acquisitions, as it sounds, has to do with the economic implications of a firm merging with or acquiring another firm. These engagements can either be initiated by the company in question to do an economic analysis of whether the merger can raise any red flags with the competition authorities, or it can be to formulate responses to any such investigations initiated by the competition authorities after the merger has happened. It usually does not deal with the question of whether a merger is a good business deal to go ahead with, that question is usually reserved for business consultants.

Mergers & Acquisitions are one of the most popular and lucrative engagements in the economic consulting industry, and are usually more resource intensive. These engagements usually have very tight deadlines too. The process is normally standardized within a particular jurisdiction or geography (EU, US etc), but the laws in different jurisdictions vary slightly. These slight differences are very important to understand, which makes some of these engagements really tricky for the economists.

Valuations

Valuation engagements usually deal with assessing the value of a tangible or intangible asset. Valuation services are required in a variety of contentious and non-contentious situations - transaction pricing and structuring in acquisitions and divestitures; strategic and financial restructuring and ownership structure transformation; compliance matters (financial reporting, regulatory, taxing and investment compliance); investor relations - these are all examples.

Organizations involved in commercial disputes require valuation opinions, expert testimony and damages calculations for these disputes. Traditional commercial disputes include matters of economic damage, post-transaction disputes, and professional negligence or stakeholder controversy. International disputes often require testimony before international courts of jurisdiction and arbitration tribunals. Economic consulting firms that are specialized in valuations and international arbitration are always engaged in the valuation of these elements of disputes.

International Arbitration

When the dispute in question is between two entities established in different countries, the most common way to resolve these disputes is through international tribunals. These disputes are very common in energy, construction, mining, securities and financial services industries, and also mergers and acquisitions involving companies from different geographic jurisdictions, but this list is growing rapidly. These international disputes can relate to more than commercial agreements, including disputes with foreign governments as well. An example is bilateral investment treaties whereby companies that are foreign investors sue a government of a country regarding the foreign direct investment. 

These international disputes often involve questions of accountancy, economics, finance and valuation, requiring expert testimony and clear communication. This is where the economic consulting firms comes into play for these engagements.

Financial and Securities Litigation

Economists are often used as consultants and expert witnesses in matters involving securities and financial fraud. While in this highly commoditized world there are numerous examples of possibilities of financial and securities fraud, one of the easiest to understand would be what is popularly known as 10b5 cases in the US. Publicly listed companies are supposed to divulge all necessary information that might affect the stock prices publicly, in a timely fashion. 10b5 cases involve any misinformation (or omission of information) by such companies for whatever reason, and the stock prices are kept artificially high for a certain period. And after a certain period this hidden information comes to light, and the stock prices suddenly fall. Investors who lost their money with this sudden fall should be paid compensation, especially since information was hidden from them illegally. This is one of the most common securities case type in the US. The 2019 Wirecard scandal was a very popular such a stock price manipulation case.

10b5 cases are just an example. Many cases of index manipulation, for example 2012 LIBOR manipulation, the 2013 forex manipulation, the JP Morgan treasury and precious metal spoofing have become common industry knowledge. In all these cases, economists are engaged as experts in the process of valuation, expert testimony and damages estimation for the affected parties.

Regulation

Regulation is a very popular practice area that most of the big firms, and a lot of new players engage in. On the regulator's side, these engagements include helping regulators to develop innovative policy, or challenge companies’ business plans, or to develop forecasts and financial models. These engagements involve assessing the impact of technological change to a sector, formalizing ideas on how to incentivize companies to provide better outcomes for consumers or estimating industry metrics like the cost of capital of the sector among many others. From the regulated business's side these engagements include working with regulated companies, their customers and their stakeholders to anticipate, influence and challenge regulatory actions, investigations or settlements. Regulation is a very established practice area in industries such as water, energy, transport and telecommunications.

These are some of the most common practice areas for major economic consulting firms. This is definitely not an exhaustive list, and the main aim was to give you some perspective of the variety of questions that economic consultants are called upon to help solve. These span multiple industries and entities, and each have their own methodological and procedural complexities. The opportunities are immense!

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