PriceWaterhouseCoopers will continue to shop for new capabilities this year, using M&A to boost its advisory services business as clients digitize operations and strive to meet economic, social and governance goals.
Last fall PwC acquired Sagence, its fourth acquisition in 18 months, as part of its effort to build up its expertise in AI and data science, CFO Dive reported.
Now, rather than slow down that initiative, PwC says the economic downturn represents an opportunity for the Big Four firm: many potential acquisition targets are under pressure in the current economic climate and evaluating their viability, likely making them more open to conversations, according to PwC. In addition, PwC clients’ ongoing digitization efforts ensure a continued need to add technology capabilities.
Doubling down
As part of its M&A efforts, the company will look to expand in cloud software engineering, data and analytical engineering and digital product engineering as they modernize their core systems in the cloud and develop new products and services, said Jenny Koehler, a strategic growth and business development leader at PwC.
“We believe companies of the future, industries of the future, will continue to… look like technology-based companies,” she said in an interview. The company’s merger and acquisition agenda, she said, will allow PwC to double down on becoming a “digital business partner to our clients.”
A key metric influencing PwC’s M&A moves, said Koehler, was referenced in the firm’s recently-released CEO study, in which 40% of global CEOs who were polled said they think their companies will no longer be economically viable a decade from now.
“Writ large, we do see our mission in large part is helping those companies be economically viable,” she said. “To do that, we need to bring them the right expertise and the right thinking, et cetera. That helps us then think about our M&A strategy of where we may either want to close gaps in our current business or …maybe where we double down.”
Becoming a “digital business partner” and acquiring the enabling skill sets, she said, helps PwC support clients as they modernize their tech stacks and adapt to evolving market conditions.
“In order to stay lean, and to stay optimized, you need to cross some degree of a chasm towards developing a digital core that's modern. The other flavor of digital transformation is more like the front-office side, reaching customers [and] continuing to do that in a highly interactive digital way,” said Koehler.
Financial services and health care, fields experiencing rapid digital transformation, are of particular interest to the firm.
A broader focus on consulting
Big Four accounting firms are competing with smaller rivals by differentiating on both price and the comprehensiveness of their offerings, said Liz Cowle, assistant professor of accounting at Colorado State University. Acquisitions, of course, help PwC build up a war chest of capabilities.
“The ‘Big Four’ are able to offer a lower priced set of services due to their economies of scale,” she noted.
Acquisitions that support the growth of PwC’s consulting arm, said Cowle, are broadly in line with efforts of other Big-four accounting firms.
“They're not only acquiring the tools and capabilities, they're also acquiring the human capital, which represents a significant asset,” she said. “I think what they're really trying to do from a practical standpoint is expand their capabilities and try to be more market leaders by buying, basically, the competition.”
