PwC has completed its acquisition of Booz & Company, a move that helps the professional services company grab a bigger slice of the Middle East consulting landscape.
The deal, which was announced as sealed today, will help to dovetail PwC’s expertise in operational consulting with Booz’s greater focus on strategy. In a move reflecting Booz’s strength in that area, it will change its name to Strategy&. The new entity will operate under the PwC network.
“We’re offering our clients in the Middle East and across the world something they can’t get anywhere else: a combination of strategy consulting expertise and a proven track record of delivery that draws on unrivalled global scale and experience,” said Hani Ashkar, a PwC Middle East senior partner.
PwC, one of the “big four” professional services companies, proposed the deal in October and partners in New York-headquartered Booz & Co approved the merger two months later. In a joint statement released today, both firms said all regulatory approvals and closing conditions surrounding the deal had been met.
PwC has operated in the Middle East for 40 years, employing more than 2,700 people across the GCC, Egypt, Lebanon, Libya, Palestine and Iraq. But after the sale of its consulting arm to IBM in 2002 it has been striving to rebuild a global focus on consulting, an increasingly more profitable business than its traditional line of auditing.
In the UAE, Booz & Co, became the first global management consultancy to open a regional office in 1993 – in Abu Dhabi – a move that helped it gain a head-start on rivals such as Bain & Co, McKinsey and Boston Consulting Group. Employing more than 500 staff in the region – making it the largest management consultancy in the Middle East – Booz & Co has secured key public and private sector contracts, while honing its expertise within priority areas for governments such as unemployment, chronic healthcare diseases and subsidy reform.
Joe Saddi, previously the global chairman of Booz & Company and a senior partner and managing director of the firm’s Middle East business, now becomes the senior vice president and managing director of Strategy& in the Middle East.
He said the deal would allow the clients and staff of the combined entities a “bigger, broader and better opportunity to connect strategy with impact”.
“Our combination with PwC enables us to offer our clients in the Middle East and across the globe the ability to develop and execute the right strategy – delivered by one trusted, experience and responsive consultant,” he said.
Mr Saddi said no jobs are threatened by the merger.
“It’s quite the opposite,” he said. “The rationale was in terms of realising synergies on clients and revenue. All the discussions we’ve had have been about how to create more jobs and grow the businesses.”
Along with fellow professional services companies KPMG and Ernst & Young, PwC retreated from consulting in about 2002 when US policymakers brought in regulations in the wake of the Enron accounting scandal. Firms were largely banned from consulting for audit clients, with some exceptions such as tax advice.
But more recently PwC has sought to rebuild its consulting operations as the market has recovered since the 2009 global financial crisis.
Fiona Czerniawska, a co-founder of Source, a specialist research company on the management consulting market, said in some respects the acquisition was a “bigger deal for the Middle East consulting market than it was globally”.
“Booz & Co is one of the dominant consultancy firms in the Middle East,” she said.
“PwC, like the other big four professional services firms, specialises in large-scale transformational projects and to do that they need to be able to offer both strategy and operational consulting. Booz & Co is more focused on the strategy side, and PwC on operational.”
PwC Strategy&’s broad of directors will be chaired by Tony Poulter, a PwC partner and global consulting leader. Cesare Mainardi, who has been the chief executive of Booz & Company for two years, becomes the chief executive of Strategy&.
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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