[Exclusive] Sam-il PwC Begins Integration Talks with PwC Consulting... Starting with Personnel Exchanges

Regulations Increase Without Benefits of Separate Entities, Leading to Reintegration
Accountants Who Complete Training Can Apply to PwC Consulting
Joint Sharing of Infrastructure Costs Planned

Sam-il PwC, the largest accounting firm in Korea, is seeking integration with PwC Consulting, which was spun off as a separate entity 10 years ago after unwinding its equity relationship. Discussions are underway on various measures, including the resumption of previously halted personnel exchanges and the sharing of infrastructure costs in line with revenue growth.

According to investment banking (IB) and accounting industry sources on June 5, Sam-il PwC discussed collaboration measures including personnel exchanges with PwC Consulting at a partners' general meeting held that day. Since the beginning of this year, Hoonsoo Yoon, CEO of Sam-il PwC, has solicited opinions on integration and collaboration at quarterly partner meetings, and is also reported to have communicated with Hongki Moon, CEO of PwC Consulting, on these matters.

Initially, personnel exchanges are expected to begin as early as next year. Accountants in their second or third year, after completing their required on-the-job training to qualify as external auditors, can select their desired division within Sam-il PwC. PwC Consulting will be added as one of the options. In addition, when new business issues arise, the two companies will form joint task forces more frequently than before, enabling their experts to respond collaboratively. As the consulting firm has grown in size, PwC Consulting will also share in the costs of large-scale investments in Korea, such as those related to artificial intelligence (AI). However, there will be no integration of partner appointment authority or changes to the equity relationship this year.

This exchange marks the first such move 10 years after Sam-il PwC completely separated its accounting audit and consulting operations. In 2006, Sam-il PwC spun off its consulting division as a separate legal entity named "Sam-il PwC Consulting." Sam-il PwC continued to hold a minority stake in the consulting firm until 2015, when it divested all its shares, making PwC Consulting an independent company. Except for a few collaborative task forces during this period, there were no personnel exchanges. To date, among the Big Four accounting firms, Sam-il PwC, EY Hanyoung, and Deloitte Anjin have each spun off their consulting divisions into separate companies—PwC Consulting, EY Consulting, and Deloitte Consulting—without retaining any equity stake. Samjong KPMG has retained its consulting division in-house.

The driving force behind these integration discussions is believed to be the tightening of regulations by financial authorities. Sam-il PwC and PwC Consulting, as network firms (companies that share a name but have no equity relationship), have each signed audit and non-audit service contracts with the same client. For example, in 2021, Sam-il PwC was the external auditor for 42dot, a Hyundai Motor Group affiliate, while PwC Consulting provided system implementation services. The following year, Sam-il acted as the external auditor for Shinsegae, while also working on the company's enterprise management system implementation.

According to Article 21, Paragraph 2 of the Certified Public Accountant Act, firms are prohibited from providing financial information system construction and operation services during the course of financial statement audits. However, regulations regarding contracts between companies sharing the same brand are insufficient. In December of last year, the Financial Supervisory Service introduced regulatory measures, such as requiring business reports to include details of non-audit service contracts by network accounting firms and revising ethical standards. As a result, it has become virtually impossible for network firms to provide both audit and non-audit services to the same client. The judgment is that if independence cannot be recognized even when the companies are separated, it is better to increase collaboration and, in the long term, integrate for more efficient operations.

The company is also aiming for revenue synergy effects stemming from the growth in consulting revenue. When the equity relationship was fully unwound in 2015, PwC Consulting’s revenue was around 169 billion won. As of last year, however, revenue had reached 446 billion won, representing 164% growth over 10 years. Breaking down Sam-il PwC’s revenue by segment last year: the audit division recorded 386 billion won, tax advisory services generated 275.9 billion won, and management consulting brought in 447.5 billion won, meaning consulting contributed more to overall sales than the core audit division. With this growth in revenue, the environment is now favorable for supporting company-wide infrastructure investments such as AI.

This content was produced with the assistance of AI translation services.