31 July 2002 Systems giant IBM is to acquire the consultancy division of accountants PricewaterhouseCoopers (PwC) for $3.5 billion (€3.58bn) – just two years after rival Hewlett-Packard agreed to buy the company for $18 billion (€18.4bn), a deal that later collapsed.
The PwC Consulting purchase is the first major acquisition for IBM under new CEO Sam Palmisano. He cited PwC’s client base and technological expertise – particularly in the areas of enterprise resource planning (ERP), customer relationship management and supply chain software implementations – as the key reasons for the deal. PwC Consulting will add 30,000 PwC employees to IBM Global Services’ headcount of 150,000.
In addition, the purchase will also help IBM Global Services – already the world’s largest services company – increase annual revenues to more than $40 billion (€40.9bn).
During 2001, IBM Global Services achieved revenues of $35 billion (€35.7bn), but sales growth fell dramatically throughout the year to just 1.4% by the fourth quarter. Significantly, PwC Consulting will add an estimated $4.9 billion (€5bn) to IBM’s revenues.
Earlier this week, PwC had officially renamed its consultancy arm Monday in an expensive – and much derided – rebranding exercise. PwC planned to spin-off and float PwC Consulting this summer, but baulked due to the current malaise in global stock markets.
PwC’s sale to IBM was partly influenced by pressure from US regulators, who have been pushing for the big accountants to separate their consulting divisions from their auditing arms in order to avoid conflicts of interest.
Sun Microsystems is unlikely to welcome IBM’s purchase of PwC. In late 2001, Sun completed a three-year deal with PwC. Sun agreed to recommend PwC as its favoured partner for Sun customers to implement customer relationship management software.