IBM has further consolidated its market leading position in IT services, by completing the acquisition of PwC Consulting for $3.5 billion, compared to the $18 billion offer made by Hewlett-Packard at the peak of the tech boom.
The company expects its acquisition of PwC to add services revenues of approximately $4.9 billion annually and 30,000 employees, including 1,300 partners, to its Global Services business, which has recently seen slow growth rates.
The acquisition is also expected to trigger a series of realignments between vendors and service companies such as IBM’s rivals Hewlett-Packard and Sun Microsystems, who had a strategic partnership with PwC.
According to Greg Brenneman, president and CEO of PwC, IBM was always the best option for the company. It had made plans for an IPO during this year, with the possibility of a name change.
However, with this deal, PwC will be submersed into the collective IBM services organization, combining with the Business Innovation unit of IBM Global Services. IBM expects the new unit to generate double-digit revenue growth at ‘a profit margin comparable to the rest of IBM Global Services’, by the end of fiscal 2004.
PwC’s partners have yet to approve the deal, which shall also be subject to regulatory approvals. If all goes smooth, IBM will pay the company $2.7 billion in cash, $400 million in convertible notes, and $400 million in stocks.