Article: PwC's Booz acquisition- The story behind the scenes

Strategic HR

PwC's Booz acquisition- The story behind the scenes

Peter Bendor-Samuel, CEO of Everest Group, shares the behind-the-scenes story of PwC's Booz acquisition
PwC's Booz acquisition- The story behind the scenes

PwC is going to have substantial and meaningful challenges as Booz & Company have a different people model


On April 3rd, global accounting giant PwC announced that it had successfully completed the acquisition of Booz & Company, a management consultancy firm, for an undisclosed amount. The deal, one of the biggest in the space in recent times, bolstered PwC’s advisory business. It has come under close scrutiny of regulatory agencies as it raises the issue of an accounting firm having wider interest in the consulting business. The 2002 Sarbanes-Oxley law in the United States barred firms from doing consulting work for audit clients.

The broader implication is in the transformation application space. The industry of consulting and transformation is largely consolidating and the Big 4 are one of the agents for the consolidation, but not the only ones. Basically, in this marketplace, big is being rewarded because they dominate customer access. You can see it in different parts of the industry like consulting and high-end services. Ten years ago, companies with specific expertise were largely the winners and now we see this trend move to those with customer access that has helped them to grow very fast.

The poster child for this is Deloitte. Deloitte was the only company in the Big 4 that did not sell its consulting business after the US SEC raised concerns about audit firms doing consulting business. They have a large offshore delivery presence in India. The other Big 4 have recognized the value of that network and are trying to duplicate what Deloitte has done and the PwC acquisition of Booz & Company is an example of that.

From the PwC perspective, it makes a lot of sense as they are getting the broader strategic consulting to go with their larger advisory practice. They are solidifying the access and without strategic consulting they were vulnerable to a Deloitte or a McKinsey contesting them for influence of the Board room and this allows them to extend their influence and also utilize them. Think of it as a focus strategy where the Big 4 are planning to extend the wide grip to keep other firms out to be able to participate fully in all the opportunities that they get. The Big 4 companies have aggressive plans to grow and they can’t get to that stage without acquisitions. The Big 4 are going to be contesting large transformation opportunities with the Indian firms now. If you think about Indian companies like TCS, Congnizant, HCL or Infosys, their long-term strategy is not just be outsourcers, but also drive large-scale transformation. The nuance of the Big 4 is to do it differently so access and capability is more important. PwC had the access and now it has the capability.

The big challenges for PwC

We are told that they barely got the partners in Booz to agree to the acquisition. Keeping the partners is going to be really important for PwC and I think that is the immediate challenge. The second challenge I think is they have a different people model and PwC is going to have substantial and meaningful challenges there. Having said that, it is a firm that is well positioned to do it as they have gone through a number of mergers already and have some experience linking business success with people models.

The evolution of Indian consulting market

Though the Big 4 players like Accenture and Deloitte were already in India, there was a gap when it came to consulting as they were less capable. The explosion of the consulting business here probably took place about 10 years ago with the entry of players such as Bain & Co and BCG. The strategy for the Indian marketplace was quite less and I think the sector will probably see a slowdown. We see the Big 4 elevating and making very substantial investments in the domestic market growth. We no longer have a situation where we have an underserved market but a robust market with adequate supply. I suspect that price points are going to be the major differentiator in the market space. The PwCs of the world has conditioned the market to a particular price point and hence Indian IT and BPO companies can get a higher premium for the same kind of service at a lower price point.

As told to People Matters

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Topics: Strategic HR, #MergersAndAcquisitions, #ChangeManagement

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