Wednesday, May 7, 2014

Why PwC's Purchase of Booz&Co. Might Mean More To You Than You Think

Across the various businesses involved in the financial services industry, it is critical to stay up-to-date with the most recent information in the marketplace. As a future consultant for Booz Allen Hamilton and an undergraduate student in Medill at Northwestern University, I believe new and seasoned professionals need to make a greater effort to understand the past, current, and future ramifications of PricewaterhouseCoopers latest acquisition of the consulting powerhouse Booz&Co (now Strategy&). I have found several articles on the acquisition that will be of interest to experts in this field.

When news first broke of PwC’s purchase of corporate consultancy Booz&Co in October, an article titled "PwC gobbles up Booz & Co as Big 4 rebuild in consulting" hit keenly on the immediate effects of this important event (reuters). Large audit firms have been moving to re-acquire lucrative consulting businesses as of late, now more than 10 years after regulators in the U.S. attempted to tear apart the two sectors. With audit revenues flattening in developed markets, the U.S. Big Four have been investing more in consulting, where business is growing after the recessionary slump. Booz&Co’s absorption marks a notable shift for firms, which backed away from consulting after Congress passed the Sarbanes-Oxley Act following the Enron debacle of 2002. Critics are worried that auditors will once again become too cozy with corporate clients and fail to vet their financial statements thoroughly, the same conflict of interest that required the government to step in a more than a decade ago; however, it is now illegal for audit clients to receive non audit services, so the previous fear of firms getting too close to clients should quell a decent amount of these concerns. While this corporate marriage was met with scandal in the past, the strategic origins of this liaison always have and continue to foster substantial revenue opportunity—but only if all parties proceed with caution. Three years ago, the article "Auditors and Consulting: Claims Of No Conflict Strain Credibility" constructed an industry savvy, in-depth glance into the logic behind the Big Four’s focus on growth into their global consulting businesses, as well as information regarding Sarbanes-Oxley and forecasting the rebirth of a trend we see so clearly through PwC’s latest market move (retheauditors).

Based on current research and my experience at Northwestern University, here are three actionable recommendations you should implement immediately:

Know the facts – above is a brief overview of a multi-faceted, critical point in the history of the financial services industry. Make sure you have a strong understanding of the past to ensure the same mistakes are not repeated in the future.

Don’t straddle the fence –if you happen to find yourself working for or with a firm that has both auditing and consulting arms and you’re unsure whether you are involved in any ethical misconduct, walk away. When it comes to queries in business ethics, it is always better to be safe than sorry.

Understand specific sector ramifications – what this acquisition means for me as a future employee of Booz Allen Hamilton carries very different implications than what it means for the CEO of Deloitte or an entry level auditor at PwC. Explore this information within the right context for you.

There will be plenty of buzz around this acquisition and it’s evolution. Make sure you and your firm are proactively in the forefront of knowledge concerning this trend, not reactively retorting from the sidelines.

Jasmine Jones is currently pursing a Bachelors of Science in Communication Studies and a certificate in Integrated Marketing Communications at Medill, Northwestern University. She has previously worked for Target and Aldi Inc, and her experiences have granted her a deep understanding and passion for working in and across various sectors of business. She would love to continue the conversation on Twitter @JasmineL_Jones.


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