PwC
| Company type | Partnership |
|---|---|
| Industry | Accounting Professional Services Tax Consulting |
| Founded | 1849 (in 1998, firm took on current name) |
| Headquarters | HQ in New York City |
Key people | Samuel A. DiPiazza Jr, CEO |
| Products | Professional Services |
| Revenue |  $20.3 billion USD (2005) [1] |
Number of employees | 130,000 |
| Website | www.pwc.com |
PricewaterhouseCoopers (or PwC) is the world's largest professional services firm. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand. PwC is the largest of the Big Four auditors, whose other member firms include Deloitte Touche Tohmatsu, Ernst & Young and KPMG.
PricewaterhouseCoopers earned aggregated worldwide revenues of $20.3 billion for fiscal 2005, and employed over 130,000 people in 148 countries.
In the United States it operates as PricewaterhouseCoopers LLP where it is the 6th largest privately owned organization. [2].
History
The firm was created by the merger of two large firms Price Waterhouse and Coopers & Lybrand. These two firms each had histories dating back to the nineteenth century.
Price Waterhouse
Samuel Price, an accountant, started his practice in London in 1849. In 1865 Price went into partnership with William Holyland and Edwin Waterhouse. Holyland left shortly after and the firm was known from 1874 as Price, Waterhouse & Co. (The '& Co' and comma were dropped from the name much later.) By the late 1800s, Price Waterhouse had gained significant recognition as an accounting firm. As a result of trade between the United Kingdom and the United States of America, Price Waterhouse opened an office in the New York in 1890, and the American firm itself soon expanded rapidly. The original British firm also opened more offices in the main countries in the British Empire, each time establishing a separate partnership in each country that gave each partner a strong incentive to expand their local practices. The worldwide practice of PW was therefore a federation of collaborating firms that had grown organically rather than being the result of an international merger.
Coopers & Lybrand
Like PW, Coopers & Lybrand had also originated in the nineteenth century. In 1854 William Cooper established his own practice in London, which became Cooper Brothers seven years later when his three brothers joined. In the USA in 1898 Robert H. Montgomery, William M. Lybrand, Adam A. Ross Jr. and his brother T. Edward Ross formed Lybrand, Ross Brothers and Montgomery. Coopers & Lybrand is the result of a merger in 1957 between Cooper Brothers & Co; Lybrand, Ross Bros & Montgomery and a Canadian firm McDonald, Currie and Co. In 1990 Coopers & Lybrand merged with Deloitte Haskins & Sells in the United Kingdom, but most other parts of Deloittes merged with Touche Ross to form Deloitte Touche Tohmatsu.
In addition to setting up an office in the major capital cities of the world, the PW or Coopers firm in each country often assimilated local accounting practices. This provided even more offices in the regions of each country and so resulted in 'critical mass', allowing the rapidly increasing number of international corporations to be fully serviced wherever they traded. Growth was also spurred by increasing audit requirements, especially after the Great Depression in the 1920s and 1930s, and by the increasing complexity of taxation.
In a further effort to take advantage of economies of scale, PW and Arthur Andersen had discussed a merger in 1989 but the negotiations failed mainly because of conflicts of interest such as Andersen's strong commercial links with IBM and PW's audit of IBM. In 1998 Price Waterhouse and Coopers & Lybrand merged to form PricewaterhouseCoopers in an attempt to gain a scale that would put the new firm in a different league. The following year merger discussions between PwC and Grant Thornton failed. Because of the reduced number of major firms, it is unlikely that further mergers would be allowed by competition authorities.
The 2002 indictment of Enron and WorldCom and the subsequent collapse of Arthur Andersen resulted in stringent U.S. Securities and Exchange Commission rules on auditor independence. One such result was the adoption of the Sarbanes-Oxley Act, which required auditor independence and separation of core audit from general consulting. This forced many of the Big Four to divest their interests in management consulting. However a major part of the firm's practice is still to provide business advice in addition to its auditing services, notably in taxation and corporate finance.
Structure and Service Lines
The legal structure of a partnership is very different to that of a company, and as such the global firm is in fact a collection of member firms, that are run autonomously in their respective jurisdictions. The senior partners of member firms sit on a global board of partners and there is also an 'umbrella' organisation called PricewaterhouseCoopers International Limited, a UK -based company which provides co-ordination. The current global CEO is Samuel A. DiPiazza Jr, a 52 year old partner of the former Coopers & Lybrand.
PricewaterhouseCoopers has up to six service lines in major countries:
- Audit and Assurance,
- Tax, (planning and compliance with local tax laws, transfer pricing)
- Advisory and Consulting which covers Performance Improvement,Transactions and M&A and Crisis Management in a range of specialist areas such as accountancy and actuarial advisory.
PwC's service lines face the market in each country by broad industry specializations such as:
- Consumer and Industrial Products and Service (CIPS)
- Financial Services (FS),
- Energy, Utilities and Mining,
- Technology, Infocomm and Entertainment (TICE).
These sub-divisions may vary slightly in some territories.
The firm also has in-house human resource services and legal services (through its correspondent global legal firm, Landwell). PwC audits 37 per cent of companies in the FTSE 100 Index; 22 per cent of those in the FT Asia Pacific 100 and 43% per cent of the Fortune 1000.
Clientele
Europe and North America account for about 82% of PwC's annual revenue, with Europe alone accounting for 45%. The firm's dominant practice is Audit & Assurance, which accounts for over 50% of PwC's revenue.
As of March 2005, PricewaterhouseCoopers' audit clients included four of the 10 largest public companies in the United States (ExxonMobil, Ford Motor Company, ChevronTexaco and IBM). PwC also audits four of the 10 largest companies in the United Kingdom (GlaxoSmithKline, Royal Dutch Shell, Barclays and Lloyds TSB).
PwC's other large clients include American International Group, Freddie Mac, Bank of America, JP Morgan Chase, Goldman Sachs, Tesco, Unilever, and the Academy of Motion Picture Arts and Sciences, the last to tabulate votes for the annual Academy Awards.
Staff
Because its major asset is the expertise of its personnel, the firm has a competitive recruiting program. PricewaterhouseCoopers is one of the top 10 companies for working mothers in 2004 according to Working Mother Media. PricewaterhouseCoopers was also recently included in Fortune magazine's "100 Best Companies to Work For" list, coming it at number 71 in 2006. According to statistics compiled by the firm from third party sources, PwC ranks in as the number 1 employer of choice among the Big 4 in student recruiting surveys from 12 countries including China, Germany, United Kingdom and the United States [3].
Not all its staff can (nor want to) become partners in the firm, and so many leave after gaining experience. Consequently PwC is effectively a large training organisation for accountants and its alumni can be found all over the world.
Consulting activities
Though the firm's core business is audit, it had created a large professional consulting branch, as did other major accountancy firms, generating about 35% of its fees. Management Consulting Services (MCS) was the fastest growing and often most profitable area of the practice, though it was cyclical. The major cause for growth in the Nineties was the implementation of complex integrated ERP systems such as SAP R/3 for multi-national companies. However PwC came under increasing pressure to avoid conflicts of interests by not providing consulting services to its audit clients. Since it audited a large proportion of the world's largest companies, this was beginning to limit its potential market. These conflicts were going to increase when additional services such as the outsourcing of ERP systems were offered. PwC therefore planned to capitalize on MCS's rapid growth through its sale to Hewlett Packard (for a reported $17 billion) but negotiations broke down in 2000. During 2000, rival firm Arthur Andersen had spun off its consulting activities as Accenture for similar reasons.
The need to separate MCS (by then known as PwC Consulting) then became urgent when the Enron scandal occurred, in which Arthur Andersen had earned large fees in devising accounting schemes which it should have questioned in its role as the auditor. PwC therefore announced in May 2002 that its consulting activities would be spun off as an independent entity. An outside consultancy, Wolf Olins, was hired to create a brand image for the new entity, which was introduced to the public as "Monday". According to a June 2002 BBC news article, the firm's CEO, Greg Brenneman described the unusual name as "a real word, concise, recognisable, global and the right fit for a company that works hard to deliver results."
These plans were soon revised, however. In October 2002 PricewaterhouseCoopers sold the consultancy business to IBM for approximately $3.5 billion in cash and stock. In August 2003, IBM revealed that the actual value of the deal was closer to $3.9 billion.
Today, PricewaterhouseCoopers brands its remaining consulting activities as Advisory Services, directed globally by Alec Jones in PwC London. Advisory services are organized by country and by industry sector. PricewaterhouseCoopers also has developed several broader consulting initiatives in the Enterprise Risk Management (ERM) framework, including a global effort to assist corporations with outsourcing, as well as a global political risk assessment and risk management service with the political risk advisory firm Eurasia Group.
This also includes a less known professional service which is actuarial related. Actuarial covers mainly 4 areas: pension, life insurance, non-life insurance and investment.
PricewaterhouseCoopers serves the federal government through their Washington Federal Practice (WFP). PwC has over 2000 professionals based in the Washington Metro Corridor. WFP’s mission is to become the U.S. Federal Government’s preferred provider of advisory and assurance services. PwC WFP helps government agencies solve complex business issues, manage risk and add value to performance through their comprehensive service offerings in financial management, program management, operations improvement, and security and data management.
See also
External links
- PwC official website
- PwC correspondent legal consulting form, Landwell
- PwC Corporate Anthem
- Monday Name Change for PWC, BBC, June 2002. News article: with links to related stories on rebranding and Accenture.
- History referenced from Hoover's. (premium login required)
- Coopers & Lybrand OK Price Waterhouse Deal New York Times article, November 29, 1997