Why are the pieces of BearingPoint going to Auditors???

Should BearingPoint clients care?

BearingPoint this week announced the breakup/reorganization plans for various parts of the firm. Essentially, once these deals are completed, BearingPoint will cease to exist. According to BearingPoint:

BearingPoint and Deloitte have entered into an asset purchase agreement by which Deloitte will purchase a significant portion of BearingPoint’s largest business unit, Public Services, for a price of $350 million, subject to adjustment and customary closing conditions.

PWC (PriceWaterhouseCoopers LLP) is set to acquire a number of pieces as well. Again, BearingPoint states:

In addition, BearingPoint has signed a non-binding letter of intent to sell a substantial portion of its North American Commercial Services business, including its Financial Services segment, to PricewaterhouseCoopers LLP for $25 million. PwC Advisory Co, Ltd. (PwC Japan), a PricewaterhouseCoopers firm operating in Japan, is also in advanced negotiations with the Company to acquire the Company’s consulting practice in Japan.

Managers of BearingPoint operations in Europe and elsewhere may try to buyout their respective practice units.

Overall, it is interesting to note the presence of Auditing firms in the acquisition of these consulting practices. While Deloitte has re-integrated their consulting practice with their Audit and Tax business, this one firm concept may preclude it from performing attest services to consulting clients and vice versa. Ditto for PWC. Remember, BearingPoint was the consulting arm of KPMG before it was split off.

Clients of BearingPoint may face some disruptions due to: - staff morale - management upheaval/change - new owners of their consultancy

Gartner offered this quick look at this week's situation. This sound bite is particularly relevant:

These deals could cause short-term disruption for many BearingPoint clients but may lead to a more stable business environment in the long run. BearingPoint clients will likely benefit from the more solid platforms of Deloitte and PwC, two of the most stable external service providers with good records of execution, for which the acquired units will be strategically important. And the three providers have similar cultures. However, BearingPoint has not finalized these deals, nor do they account for all of BearingPoint's businesses. This uncertainty may drive some BearingPoint employees to seek jobs elsewhere — and the transition will bring an inevitable loss of focus.

Continuous monitoring of one's consulting partners is always prudent and these days that's really good advice.

Hopefully, two things will occur. 1) These deals are approved and finalized very quickly. The issues with BearingPoint have doubtlessly worn heavily on employees, management and clients for too long. A fast resolution would benefit everyone. 2) Stability will return to the work environment for the BearingPoint employees.

Finally, let's not forget that BearingPoint grew its workforce significantly a few years ago when it acquired many of the personnel of the late Business Consulting practice of Andersen (nee Arthur Andersen). For those former Andersen employees who are still with BearingPoint this has to be a particularly hard bit of medicine to swallow. First, their original employer, Andersen, cut them loose and sank. Now, their second employer has done it again. Will their third employer fare better? Does anyone believe in "Third time's a charm?"

************* UPDATE ************** Be sure to check out Phil Fersht's take on this at AMR Research