Downturn Stops It Adding Up for the Bean-Counters

By Hosking, Patrick | The Evening Standard (London, England), June 5, 2002 | Go to article overview

Downturn Stops It Adding Up for the Bean-Counters


Hosking, Patrick, The Evening Standard (London, England)


Byline: PATRICK HOSKING

Patrick Hosking on an industry that is reeling from a double whammy WHEN PricewaterhouseCoopers announced plans to float off its consulting arm in April, there was jubilation in the Embankment headquarters. The partners in the accounting giant expected to pocket windfalls of about $1 million ([pound]685,000) each.

One auditing partner said: "It's time to be thinking about early retirement on a small hot island somewhere a long way from a balance sheet."

Alas, it hasn't worked out like that for the PwC bean-counters. The proceeds from the sale - even if a hoped-for $4.5 billion is achieved - will not go directly into the pockets of the 7500 partners. It will be used instead to beef up various pension funds in the accounting group, which have been hit by the downturn in world share prices.

It is one more example of how things have gone sour for the accountants, as they go about hiving off their once-lucrative consulting divisions.

Today's sale of KPMG Consulting in Britain and the Netherlands reveals how far expectations have sunk. The accountancy parent will receive just e657 million ([pound]423 million) for the businesses, a fraction of what might have been expected if the deal had gone through two years ago.

At the height of the hi-tech boom of 2000, Hewlett-Packard said it was prepared to offer a staggering $18 billion in shares for the PwC Consulting arm. That deal collapsed alongside the Hewlett share price. One deal that did see the light of day was the $11 billion in cash and shares paid by the French consultants Cap Gemini for Ernst & Young's consulting division 18 months ago.

But that deal has no happy ending. The combined business, Cap Gemini Ernst & Young, has been in difficulties ever since, hit by high-profile departures, falling revenues, profit warnings and culture clashes. …

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