PwC Merger - Visions of the future
On the eve of the biggest merger in recent times, Accountancy Age writers talk to the leaders of the new merged firm
On the eve of the biggest merger in recent times, Accountancy Age writers talk to the leaders of the new merged firm
Peter Smith is running out of days to wear his gold Coopers & Lybrand cufflinks, writes Jon Bunn.
Smith, currently Coopers’ UK senior partner, will take up the same role at PricewaterhouseCoopers – the world’s biggest accountancy firm – from next Wednesday, when the merger with Price Waterhouse officially takes place.
For him, a symbolic gesture of his commitment to the new firm will be to take off his Coopers’ garb and replace it with shiny new PwC gear. ‘But that’s on 1 July,’ Smith says, while taking a break from Coopers’ last European partners’ conference in the Czech Republic capital Prague. ‘I will be wearing them until then.’
The past 12 months have taken their toll on Smith. He has played a major part in the small global team fighting to bring the two accounting giants together and to create a business with a combined worldwide fee income of $15bn (#9bn).
Countless air miles have been clocked up, as Smith has jetted between a seemingly endless round of meetings around the world. He admits to being ‘absolutely knackered’ but is kept going by enormous amount of pride for his part in creating the world’s biggest provider of business services.
‘When you get to the wire in any corporate finance deal there’s always a lot to be done at the last minute,’ he explains, ‘and I will be delighted when 1 July eventually arrives. But I am extremely pleased to have contributed to the new organisation and I have a total lack of humility when I say I was part of the team that got us here.’
It has been a year of extreme highs and lows. Highs such as announcing the merger plan to the world.
Lows when Big Six rivals Ernst & Young and KPMG shocked the profession by revealing that they too planned to merge.
It was back to a high when they called it off months later. Smith was on holiday at a remote Caribbean hideaway when E&Y and KPMG walked away from each other. His secretary knew he was not to be disturbed, but sent a brief fax. ‘We celebrated with a few drinks that night,’ Smith reveals.
But he knows that once the champagne has been drunk on Wednesday morning and the toasts made to PwC, the real work begins. There will be little time for any sense of anticlimax to set in. A large part of that work will be proving to clients and staff that the merger matters – that it will make a difference to the way PwC operates and the service it provides to its thousands of clients.
‘The challenge to all our people is to understand what resources they have available, to look at the issues facing their clients and then solve the problems they previously could not,’ Smith adds. ‘If we don’t make a difference then we will have failed.’
Unsurprisingly, Smith has always argued against critics of the merger and he is still quick to see off doomsters who say the marriage will limit choice. ‘That noise has come from a certain constituency of finance directors.
If I were an FD, I would say how awful the merger is, because then my auditor would think twice about handing out a fee increase notice,’ Smith says with a wry smile.
‘My experience is that almost every chief executive recognises the need for global scale. If you look at any big client’s needs, they want a universally competent service.’
PwC’s new senior partner realises the firm would be nothing without its staff: ‘At the end of each day, all our assets walk out of the door and we hope they will come back in the morning.’ Against all predictions, retention rates are up. Staff and partners, Smith claims, are ‘voting with their bottoms’, enthused by the unprecedented opportunities the merger offers for career development and a truly global workplace.
But ambitious growth rates – Smith jokes that by 2025 everyone in the world will work for PwC according to current projections – mean the firm must attract the best recruits. PwC is set to continue the trend away from employing chartered accountants and graduate trainees, turning instead to experienced professionals who have proved successful in specialist areas. He even admits to being a fan of Labour’s New Deal and is keen to find a way of hiring a ‘completely new set of people’.
It will take time for PwC to bed down. Smith admits that, in 30 years’ time, retiring partners will still talk of themselves as PW or Coopers people. But, within five years, all staff to manager level will be PwC people adhering to the new firm’s unique culture which ‘will emerge. We can’t force it’.
A multimillion pound branding exercise should help forge a fresh sense of identity and Smith hopes PwC’s Rolls Royce-like logo will become as familiar and prestigious as the car’s brand.
PwC starts from a position of strength. It is there for the rest of the profession to chase; but if it consolidates its position, it will not just be Smith who will be proud to wear his gold PwC cufflinks.
POST-MERGER PROGRESS FULL OF EASTERN PROMISE
Mention the merger between Price Waterhouse and Coopers & Lybrand and two words – ‘global’ and ‘opportunity’ – are bound to follow in the next breath.
There are few places where the opportunities are greater than in central and eastern Europe. Both firms have been in the region since the Berlin Wall collapsed, but their merger provides an unprecedented chance to not only cement their current leading position in the European region, but to put a sizeable amount of clear water between PwC and rivals.
PwC will have a presence in 19 of 27 countries in a region that stretches from the Czech Republic in the West to the easternmost tip of Russia. The merged firm has not commited itself to Albania and Bosnia, for instance. It does not want to do so at the moment – but with companies such as Volkswagen setting up in Bosnia, it won’t be long before PwC and others follow the audit trail there.
Coopers partner Andrew Warren is charged with building upon the two firms’ current success. Just like other parts of the business, Warren faces a resource problem. ‘We’re growing at about 40% a year in fee terms and merging gives us a greater depth of resources,’ explains Warren.
But within five years, Warren hopes to have broken the traditional mould of having foreign practices run by ex-pats. Employees trained under ACCA when the two firms first entered the region are now at manager level and are being groomed for partnership.
Warren estimates that 60% of the audit market, currently in the hands of local auditors, is still up for grabs. ‘Audit is phenomenally popular,’ he adds, ‘as people can make money. Western investors want to look after their assets and have an audit as reassurance.’
Warren says he hopes PwC’s big-name brand will act as a magnet to his European clients, hungry for success. BEGINNING THE WORLD AGAIN
On Ian Brindle’s desk in what is, until next Wednesday, the London headquarters of Price Waterhouse sits a striking sculpture. The head of a man, thrown back with his mouth wide open, appears to be shouting silently, writes Douglas Broom
As UK chairman of PricewaterhouseCoopers and a member of the merged firm’s eight-strong global leadership team, Brindle will be doing a lot of silent shouting over the coming months.
In his last days as UK senior partner, his message to his own troops about what lies ahead after 1 July is as upbeat as it is uncompromising. ‘Most certainly we are about to create a new organisation,’ he says. ‘From 1 July, everybody has to be part of PricewaterhouseCoopers.’
‘I am not interested in people reminiscing about the good old days at PW. You do not live your life in the future by repeating the past. If you have got a PW or a Coopers & Lybrand golf umbrella, would you kindly throw it in the bin and get a PwC one,’ adds Brindle.
The talk may be tough but the launch on 1 July is officially ‘soft’. He says: ‘Peter Smith (senior partner of Coopers and soon-to-be PwC senior partner) and I are determined that when people walk into their offices on 1 July, they will walk into the offices of PwC and not the old firms.’
All the ‘brass plates’ on the outside of PW’s and Coopers’ offices will be changed overnight and banners will hang in the entrances to signal the change. At Southwark Towers, PW’s London head office, clocks in the lift lobbies have already vanished, banished because of the PW logo on their dials. ‘We have got to get the message across to the people that PW and Coopers are now part of the glorious history and that the present and future is PwC,’ he adds.
In spite of all this 1 July activity, the ‘hard’ launch comes in the autumn, probably October, when the hard facts about the new firm will be rolled out to the marketplace. ‘It will give us some breathing space to get everything sorted,’ says Brindle candidly.
The process of ‘getting sorted’ has already begun, with a worldwide agreement on a new audit methodology and an agreed statement of objectives for the management consultancy business, replete with the usual consultants’ flowcharts and graphics. All 65,000 members of the firm’s global audit teams will be retrained in two waves, starting in July with 40,000 staff in the ‘major territories’. Wave two will start to roll when wave one ends in October. ‘For all December 1998 year-ends, everybody will have been retrained,’ explains Brindle.
Making the new firm a reality will be achieved, wherever possible, by ensuring that teams are mixed across the business. The aim is to prevent pockets of PW or Coopers’ culture remaining untouched by the new world of PwC. Brindle says tracking down the renegades will be an important task for UK joint managing partners Kieren Poynter, currently PW’s managing partner and Coopers’ Peter Hazel who currently heads its business assurance operation.
A new common contract of employment, together with a uniform benefits scheme, will be in place by 1 January 1999, says Brindle. On 1 July, every member of staff will get a ‘brand positioning’ brochure to help set the tone for the new corporate culture. ‘It is highly important that people change their attitudes,’ says Brindle. ‘They have got to be encouraged to see that they are now part of a new organisation and that their loyalties are to that organisation and all the people in it.’
Brindle is adamant that there will be no job losses. ‘We are not waiting to downsize; the fact is that we are short of people,’ he says. ‘We also need all the partners we have got. A handful of people, who may find that it is not as pleasant an environment for them as it once was, might go. But that will be their decision, not ours.’
PwC says it will need to recruit 1,000 people a week worldwide over the next 12 months, and in the UK its plans to take on 2,500 graduates a year will make it the country’s biggest graduate recruiter. In the face of all this change and growth, Brindle is surprisingly bullish about how fast the new firm will take shape.
Asked to say when he expects the process of integrating the new firm will be complete, he says: ‘I think within the UK we will have it cracked within 12 months.’ The clock starts running next Wednesday morning.
PEOPLE AND PLACES
Huge efforts have gone into turning two already large firms into one professional services giant. In the UK, stage-managing day one falls to Mike Goolden, currently a partner in the tax and legal division of Price Waterhouse, and Peter Wyman, head of taxation at Coopers.
Throwing out a hundredweight of old stationery, pens and business cards and replacing them with the new brand is just one of the tasks they have been overseeing. Operating systems will have to be linked, telephone systems made compatible and staff from both merging firms introduced to their opposite numbers.
To meet growth targets, PwC needs to hire 1,000 people each week across the world. And in the UK, the firm will recruit 2,500 graduates each year.
PwC will be looking to consolidate in the former Soviet states, Asia-Pacific and Latin America. High-tech practice work will yield revenues of $1bn (#620m) from over 2,500 technology clients, and work with financial services clients will represent more than 20% of international revenues.
Staff are optimistic about what these moves will do to their own career ladders. Paul Mapleston, in PW’s audit and business advisory service unit in Bristol, says staff are looking forward to 1 July.