PwC recently announced the pending sale of its global mobility practice to Clayton, Dubilier & Rice (CD&R), one of the oldest private equity firms in the world. The price tag? A mere $2.2 billion dollars.
While the possibility of a sale has been known for some time – and won’t be completed until calendar year 2022 – the official announcement is akin to a shift in one of the earth’s tectonic plates for professionals working in the global mobility industry.
What does this mean for PwC’s clients? Its client-serving professionals? How are its competitors likely to react?
Who knows? But here are some initial thoughts you may want to consider.
What is Global Mobility:
Global Mobility is a niche industry comprised of a broad array of service providers who help companies deploy their employees to other countries efficiently and effectively – for either short or long durations of time.
The tax, immigration and other law-based services required to support a mobile workforce are typically provided by professional services firms including Big 4 firms, most regional professional services firms and highly-specialized firms like Zander Sterling.
Zander Sterling’s Initial Thoughts to Consider:
- PricewaterhouseCoopers is a multinational professional services network of firms, operating as partnerships under the PwC brand. PwC’s member firms in 40 or so countries have their own global mobility practices.
If we assume the sale includes all mobility practices globally, then extracting the entire practice unit’s people, processes, technology, legal agreements, HR systems, etc. and re-establishing them in a new, stand-alone business will be a daunting undertaking.
Execution by both PwC and the new company that’s being created by CD&R will be critical over what will likely be a protracted transition period. Failure to deliver would place retention of strategic clients at risk.
- The Big 4 firms provide employees with outstanding opportunities for professional and personal growth that can’t be replicated elsewhere. How will PwC’s global mobility professionals react to the news that the fundamental structure of the firm they joined has changed? Will they be patient enough to see how things turn out or will they leave? And if employees leave, what will that mean to client service?
- Private equity firms typically run very lean, technology-leveraged operations in order to achieve their targeted rate of return on investment. What will “lean” look like in the context of highly-complex professional services such a global mobility? What will the new company’s culture be like?
For employees, career paths coupled with related compensation and benefits packages will be different than what is customarily offered by large professional services firms. Will the “new deal” for employees be effective at attracting and retaining the best and brightest talent? What are the implications if it isn’t?
For clients, will the deployment of client-facing, technology-enabled solutions be accelerated? Probably. Will new solutions be developed that provide the type of fully-integrated experience desired by companies that have a large number of internationally mobile employees? Perhaps. But that’s a complex and expensive order to fill.
- Companies that have a small number of globally mobile employees typically don’t provide the monetary and strategic value desired by Big 4 professional service firms. Will the new company’s approach be different or will such client companies be viewed as diluting the company’s ability to properly serve its mission-critical accounts?
- Since the passage of Sarbanes-Oxley and similar anti-fraud laws globally, professional services firms like PwC have been effectively prohibited from providing global mobility services to the firm’s publicly traded audit clients. And pressure by regulators around the world to eliminate potential conflicts-of-interest continues.
By divesting of its global mobility unit, PwC eliminates potential regulatory pitfalls. For the newly formed global mobility entity, the regulatory shackles will no longer apply and it will be well-positioned to provide an expanded array of non-attest services to companies that were once “off limits”. I suspect this point is quite alarming to the mobility practices at other Big 4 firms.
- Will EY, Deloitte and KPMG follow PwC’s example and divest their respective global mobility practices? To whom would they sell their practices, a private equity firm? What if one or more of these firms sold their mobility practices to the new company being formed by CD&R? Can you say “juggernaut”?
- Until the COVID-19 pandemic took hold of the world, the global mobility industry experienced year-over-year growth due to the increasing number of companies that had their talent working internationally. The pandemic, however, placed an unprecedented stranglehold on the industry via shelter-in-place mandates and other travel restrictions.
As these restrictions lift, companies anticipate a resurgence in the mobility of their personnel. It appears CDR believes them and its sizable investment will bolster the new company’s ability to compete in the global mobility space.
- CPA firms such as PwC have restrictions on the type of entity they can be and the services they may provide.
What type of legal entity will CD&R’s new company be? The type of entity chosen will have a direct impact on the services it may provide and the manner in which it may provide them. Proper entity selection can also enable a more cohesive global operating model than the current independent partnership structure under which PwC currently operates.
What scope of services will it provide? Will it be limited to those historically provided by PwC (doubtful) or be expanded to include services such as global payroll management, relocation management, or professional employer services?
How this event – and other reactive ones certain to follow – will ultimately re-shape the global mobility landscape is anyone’s guess, but it will be an interesting journey along the way.