PwC gobbles up Booz & Co as Big 4 rebuild in consulting

Reuters

By Dena Aubin and Kevin Drawbaugh

Oct 30 (Reuters) - PricewaterhouseCoopers said on Wednesdayit agreed to buy Booz & Co., ratcheting up an aggressive move bylarge audit firms back into the lucrative consulting businessmore than 10 years after U.S. regulators tried to tease apartthe two sectors.

PwC, one of the world's Big Four audit firms, saidit will buy corporate consultancy Booz for undisclosed terms.Subject to approval by Booz's partners, the transaction was thelatest in a string of similar acquisitions.

With audit revenues flattening in developed markets, theU.S.-based Big Four - also including Deloitte, KPMG and Ernst &Young - have been investing heavily in consulting, wherebusiness is growing after a recessionary slump.

With the exception of Deloitte, the trend marks a shift forthe firms, which backed away from consulting around the time ofthe 2002 passage of the Sarbanes-Oxley law in the United States.

Approved by Congress in answer to the Enron-era accountingscandals, Sarbanes-Oxley barred firms from doing consulting workfor audit clients, with some exceptions such as tax advice. Thelaw left audit firms free to sell consulting services of allkinds 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 helpedlift its revenues above those of arch-rival PwC.

With consulting's growth beckoning and Enron receding in therear-view mirror, PwC since 2009 has made big consultingacquisitions, including Paragon Consulting Group; the commercialservices consulting arm of BearingPoint; and smaller consultingfirms in digital, social media and environmental areas.

$1 BLN EXPANSION PLANNED

Earlier this month, PwC said it planned to spend $1 billiongrowing operations worldwide in the next three years, includingclient offerings such as cyber-security and risk services.

Deloitte has bought a slew of consulting firms,including energy consultants Altos Management Partners and AJMPetroleum Consultants; performance management advisory firmJackson Browne; economic consultancy Access Economics; businessanalytics firm Oco; and sustainability specialists Clear CarbonConsulting and DOMANI Sustainability Consulting.

KPMG and Ernst & Young have also madeseveral consulting acquisitions in recent years.

Booz is not related to Booz Allen Hamilton, theconsulting firm best known for its work with the U.S. governmentand former employee turned secrets leaker, Edward Snowden. Booz& Co separated in 2008 from Booz Allen Hamilton.

A spokeswoman for the Public Company Accounting OversightBoard, which regulates audit firms, said the board does not needto approve the Booz transaction, "although we have an interestin it, partly because of the independence issues it raises."

Audit firms' consulting services came under scrutiny inEurope after the 2007-2009 financial crisis, when the Big Fourwere criticized for not warning of problems at major banks.

Critics said the auditors were too cozy with corporateclients and failed to vet thoroughly their financial statements.

The European Union in 2011 floated plans to ban theprovision of consulting services by audit firms. It has sincebacked away from that, but the EU is still considering a cap onadvisory fees an auditor can earn from a company it also audits.

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