PWC to Pick Up Booz: No Drinks All Around Just Yet (Part 1)
Earlier today, PWC announced it was acquiring Booz & Co, the arm of the original Booz Allen Hamilton that was left over after the firm had sold off its public sector practice that was then taken public. The transaction is subject to approval from Booz & Co’s roughly 300 partners in December. PWC has over 9,000 partners, and adds, just on the audit side, some 50+ new partners per year from within the ranks. In total, PWC had $32 billion in revenue in its latest fiscal year, with about $9 billion coming from ‘advisory’ – making it one of the largest of the Big 4 (it tends to be neck-and-neck with Deloitte each year).
In contrast, Booz is a small player on the global consulting stage by the numbers (our estimates at somewhere just shy of $1.5 billion in revenue for 2013 and 3,000+ consultants), but not when it comes to legacy and influence. But, ironically, the current iteration of Booz & Co is quite different when the strategy and operations consulting landscape consisted largely of McKinsey, AT Kearney, Arthur D. Little (ADL), and Booz Allen – and to a lesser degree firms like BCG, Bain, PRTM, Andersen/Accenture, and others. Back then, Booz was a more formidable force in procurement consulting, with leaders like Tim Laseter (who authored the book Balanced Sourcing and is now a Darden professor and advisory board member and contributor at Public Spend Forum).
Booz & Co today (the private sector focused firm) was in part seeded from the acquisition of Katzenbach Partners after the firm had split apart from the public sector practice. This brought significant IP to the practice and also helped influence the culture. Booz itself had been making focused acquisitions such as Katzenbach and Management Engineers to expand selectively in certain capability areas and geographies, but now the role is reversed as PWC looks to pick up some of these unique assets (e.g., Booz digital is an extremely unique group) that should help fuel growth and innovation.
In addition, the deal (once closed) should help drive more attractive mind share (and margins) that such service lines bring as compared to tax and audit services – especially given the margin erosion due to, ahem, better strategic sourcing of such managed services. And of course, in the quest for growth, nothing helps fill the sales funnel than strategy work which inevitably leads to ‘capability gaps’ to be filled and a transformation project portfolio to execute.
Sounds great, right? But, as we know, such M&A activity is fraught with challenges, especially with such large firms and large egos (not necessarily in a bad way if harnessed properly).
In our next installment of this series, we’ll dive into the cultural implications and also some of the impact on procurement and supply chain services. There are some cautionary tales, but also some potential for greatness. Stay tuned.
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