By Dena Aubin and Kevin Drawbaugh
Oct 30 PricewaterhouseCoopers said on Wednesday
it agreed to buy Booz & Co., ratcheting up an aggressive move by
large audit firms back into the lucrative consulting business
more than 10 years after U.S. regulators tried to tease apart
the two sectors.
PwC, one of the world's Big Four audit firms, said
it will buy corporate consultancy Booz for undisclosed terms.
Subject to approval by Booz's partners, the transaction was the
latest in a string of similar acquisitions.
With audit revenues flattening in developed markets, the
U.S.-based Big Four - also including Deloitte, KPMG and Ernst &
Young - have been investing heavily in consulting, where
business is growing after a recessionary slump.
With the exception of Deloitte, the trend marks a shift for
the firms, which backed away from consulting around the time of
the 2002 passage of the Sarbanes-Oxley law in the United States.
Approved by Congress in answer to the Enron-era accounting
scandals, Sarbanes-Oxley barred firms from doing consulting work
for audit clients, with some exceptions such as tax advice. The
law left audit firms free to sell consulting services of all
kinds to companies that were not audit clients.
PwC sold its consulting arm to IBM in 2002. In contrast,
Deloitte did not follow suit - a decision that has since helped
lift its revenues above those of arch-rival PwC.
With consulting's growth beckoning and Enron receding in the
rear-view mirror, PwC since 2009 has made big consulting
acquisitions, including Paragon Consulting Group; the commercial
services consulting arm of BearingPoint; and smaller consulting
firms in digital, social media and environmental areas.
$1 BLN EXPANSION PLANNED
Earlier this month, PwC said it planned to spend $1 billion
growing operations worldwide in the next three years, including
client offerings such as cyber-security and risk services.
Deloitte has bought a slew of consulting firms,
including energy consultants Altos Management Partners and AJM
Petroleum Consultants; performance management advisory firm
Jackson Browne; economic consultancy Access Economics; business
analytics firm Oco; and sustainability specialists Clear Carbon
Consulting and DOMANI Sustainability Consulting.
KPMG and Ernst & Young have also made
several consulting acquisitions in recent years.
Booz is not related to Booz Allen Hamilton, the
consulting firm best known for its work with the U.S. government
and former employee turned secrets leaker, Edward Snowden. Booz
& Co separated in 2008 from Booz Allen Hamilton.
A spokeswoman for the Public Company Accounting Oversight
Board, which regulates audit firms, said the board does not need
to approve the Booz transaction, "although we have an interest
in it, partly because of the independence issues it raises."
Audit firms' consulting services came under scrutiny in
Europe after the 2007-2009 financial crisis, when the Big Four
were criticized for not warning of problems at major banks.
Critics said the auditors were too cozy with corporate
clients and failed to vet thoroughly their financial statements.
The European Union in 2011 floated plans to ban the
provision of consulting services by audit firms. It has since
backed away from that, but the EU is still considering a cap on
advisory fees an auditor can earn from a company it also audits.