PwC and Booz: how big a deal is this?

By Fiona Czerniawska

Yesterday’s announcement, that PwC and Booz & Company have signed a conditional merger agreement, comes as something of a relief.  The consulting industry has been awash with rumours, some intriguing, some bizarre, since the summer and now – finally – there’s something concrete to react to.

There are three groups whose reactions matter here: competitors, consultants and clients.  Let’s start with competitors because, although you can argue this is the least important group, it will certainly have the greatest influence on the media coverage of the proposed merger over the next few days.

There won’t be any official reaction from other consulting firms, of course.  Why should there be?  It’s not really any of their business and most would say that their priority is serving their clients, not opining on events in their industry.  Behind the scenes, some will argue that the merger will make no difference to them because they have a different model or work in a different area of the market.  Most will use silence to give the impression of indifference: “Why would we comment on this? It doesn’t change things.”  They'll argue that Booz has become an increasingly marginal player in the strategy space: the firm’s more operational bent has put space between it and McKinsey, Bain and BCG; that its smaller scale has made it hard for the firm to compete in the increasingly global market for consulting services; that the writing has been on the wall for all to read, so some of Booz’s best people have already left and more will do so in the coming months.

It’s the same ‘damaged goods’ argument we heard about Deloitte’s acquisition of Monitor last year – and its function is precisely the same, to downplay the significance of the deal.  But it ignores several important points.  Booz is bigger: in some markets – notably the Middle East – it’s unquestionably a dominant player.  It sits comfortably in the valuable space between strategy and execution and clients point to its collaborative way of working.  And, while it may sit on the walls of what we call ‘Fortress Strategy’, from a client perspective it is certainly in the castle.

It’s also not what PwC and Booz’s competitors say today that matters, but what they do tomorrow.  As we’ve argued before, the pressure for consolidation comes partly from the need to win large-scale transformation projects, and no one firm has all the capabilities it needs to take a commanding lead. The likelihood of further consolidation happening comes down to the fear of being left behind: this deal, and any subsequent ones, will reduce the range of choices, so doing something sooner rather than later will make sense.

The PwC/Booz merger will be a very big deal indeed if it triggers a wave of consolidation at the top end of the consulting industry.

And clients and consultants?  We’ll cover that side of things over the next couple of days.