process of securing significant assets of bankrupt consultancy
BearingPoint.
Deloitte US has signed an agreement to
acquire the assets of BearingPoint’s North American public services
practice for $350 million. PricewaterhouseCoopers (PwC) has signed
an agreement in principle to acquire a significant portion of
BearingPoint’s North American commercial services practice, which
includes the firm’s financial services segment, for $25 million.
And, PwC Japan’s advisory firm has reached an agreement in
principle to acquire and integrate with BearingPoint’s entire Japan
practice consulting business.
The agreements are subject to approval by the
bankruptcy court. By law, BearingPoint must also consider “higher
and better” bids, and there is no assurance that these offers will
go through. BearingPoint is a global management and technology
consulting company that filed for voluntary Chapter 11 bankruptcy
protection on 18 February this year.
A global sale
A BearingPoint spokesperson told the
International Accounting Bulletin that selling off these
US practices is part of a global reorganisation plan.
“We’re also in late term negotiations with
many of the non-US management teams for them to buy out their
practices. They would take over ownership of their respective
businesses and probably continue to use the BearingPoint name but
would operate as independent entities,” he said.
Deloitte described the acquisition of
BearingPoint’s public services practice as a “compelling strategic
transaction”.
“We have seen strong organic growth in this
business over the past five years, and the addition of
BearingPoint’s projects and practitioners would position us for
even stronger performance as government agencies in Washington and
around the country confront significant challenges,” Deloitte
said.
BearingPoint’s public services business
focuses on all tiers of government but the bulk of its work is
federal. The practice generated revenue of $1.4 billion in the
2006-2007 financial year.
PricewaterhouseCoopers US advisory partner
Randy Browning told the International Accounting Bulletin
the firm is attempting to acquire most of the assets from
BearingPoint’s US commercial services practice, with the exception
of contracts that would breach US audit independence rules.
“As part of continuing to build and grow our
advisory business we have found that to help companies through
significant change and business transformation, the technology
aspect of those projects are critical. What this does is supplement
and boost that growth and further compliment the resources we
have,” he said.
Browning said BearingPoint is particularly
strong in the energy and utilities, banking, insurance and
pharmaceuticals sectors and would add technology skills in Oracle,
SAP and other areas.
Long-term play
Although the economic downturn is
affecting the demand for IT consulting, Browning said the
investment is part of a long-term strategy to build capability and
market share.
BearingPoint formed out of KPMG Consulting in
2002 and has suffered financial problems in the past few years.
After posting positive financial results for the first time in
three years last August, the firm’s stock value plummeted on the
New York Stock Exchange to 18 cents with market capitalisation of
only $39.2 million. In 2002, BearingPoint shares were worth
$8.80.
BearingPoint filed for bankruptcy protection
in the US to facilitate financial restructuring in order to reduce
debt and improve its capital structure. BearingPoint chief
executive Ed Harbach said the firm has been committed to “charting
the best possible course for the people, clients and creditors of
BearingPoint”.
“We have concluded that a sale of the
company’s business units maximises value and provides the greatest
stability for all interested parties,” he said.
“We are pleased that several parties have
expressed interest in purchasing the majority of the company.”
