There is never a single reason behind the business case for an acquisition of this magnitude. Let me offer a picklist of reasons that I believe were all in the mix, though I will leave it to other more subjective posters here to assign relative weights: 1. Penn & Teller strategy - To attempt to buy instant credibility for business processes and industry expertise and blunt the relative competitive advantage of some of their prime competitors in those areas, which was cutting into BIS, SO, BPT etc. 2. Carnivore strategy - The reincarnation of PwC as an independent (I just can’t bring myself to mention the intended name!) had BPO as one of its core growth strategies even before the spin-off. IBM did not want another player in this space, because deep down they knew that their SO market was in a decline, and they couldn’t afford another player that would further dilute margins through price erosion and impetus to have to increase service levels. 3. Thankgodforseenoevilauditors strategy. – PwC had been looking the other way for years on the accounting games, and it was time for IBM to pay them back for all their help. PwC was desperate to sell as quickly as possible to avoid a potential quantum reduction in market share from the independence issues and related half-dozen or so shady audit relationships that were in the news in 2001/2002. IBM was one of the few suitors that had the wherewithall and relationships to expedite this, so PwC audit made it happen. 4. Kill the golden goose strategy - IBM thought they could wring some costs out of the organization, since PwC staff were “overpaid vis a vis the current market”, and “they had no place else to go”. The 7% across the board salary reduction at PwC was initiated by IBM well before the deal was signed. 5. Instant history strategy - For the client lists, citations, and C-level relationships 6. Growth is king strategy - For the existing revenue streams – IBM needed an instant boost to its top-line in order to appear to still be growing. Organic growth was anemic at the time. 7. Cut the fat strategy - To take advantage of operating synergies and redundancies – unfortunately they structured the deal in a way that they couldn’t realize these up front, and the decisions that were made were based on politics instead of rational staff evaluations. I could go on for pages on why these reasons were so weak, but I’ll leave that for another day.
