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   By Julie Steinberg and Tess Stynes 
 

Auditing firm PricewaterhouseCoopers agreed to buy Booz & Co. in a deal under which Booz is expected to expand PwC's consulting capabilities.

The merger will allow PwC to tap into management consulting firm Booz's experience developing strategies for clients. PwC has previously focused more on executing strategies, rather than developing them, for its clients.

Financial terms weren't disclosed for the preliminary deal, which requires approval by Booz's partners as well as anti-trust regulators. The Booz partner vote is set for December.

Consulting is increasingly becoming a larger part of accounting firms' mandates. At PwC, advisory revenue rose 8% in fiscal year 2013, versus 1.4% for its assurance and audit business.

While PwC is larger than Booz overall, with $32.1 billion in global revenue for the fiscal year ended June 30, Booz's business in strategy development is "larger" and "better-established," a person familiar with the deal said. Overall, Booz employs roughly 3,000 people, while PwC has more than 184,000 employees.

In an email sent to Booz alumni Wednesday morning, the firm's two top executives said Booz had considered "our own current scale and position" as a factor in the decision to merge.

The email, which was reviewed by The Wall Street Journal, also said "we are seeing considerable consolidation globally." Booz has done two acquisitions of its own in the past 10 months.

One potential issue for the deal: PwC avoids doing management consulting for any of its audit clients. So Booz partners who do work for PwC audit clients might have to give up business, generating concerns about the deal.

There aren't likely to be significant layoffs, said a person familiar with the matter, but the firms are still working through the details of the merger and haven't made any final decisions.

Booz & Co. was formed after Booz Allen Hamilton separated its corporate consulting arm from its bigger government advisory business in 2008. The government advisory unit retained the original name after the parent company sold a majority stake in the unit to Carlyle Group LP (CG).

Booz & Co. had revenue of about $1.4 billion in 2012, most of which stemmed from strategy and operations consulting, estimates Tom Rodenhauser, a managing director at Kennedy Information, a market-research firm in Keene, N.H. That figure is up from about 1.2 billion in 2011, he says.

Earlier this year, The Wall Street Journal and other media had reported that consulting giant Accenture PLC (ACN) was in talks to acquire smaller rival Booz & Co. At the time, the Journal also reported that it wasn't clear whether there were other potential buyers.

-Joann Lublin contributed to this article.

Write to Julie Steinberg at Julie.Steinberg@wsj.com and Tess Stynes at Tess.Stynes@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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