Andersen Consulting may float at $25bn

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The Independent Online

Partners in Andersen Consulting could receive shares worth $10m (£6.7m) each if the firm decides to float after winning its freedom from sister company Arthur Andersen.

Partners in Andersen Consulting could receive shares worth $10m (£6.7m) each if the firm decides to float after winning its freedom from sister company Arthur Andersen.

The consulting giant has been valued at a potential $25bn by City analysts after KPMG announced plans to float its own consulting arm last week. The KPMG business, which is less than a quarter of the size of Andersen, is to be valued at up to $5.6bn in the float.

This figure is nearly three times revenues. On a similar multiple, Andersen Consulting, which had revenues of $8.9bn last year, would be worth up to $25bn.

The firm is considering a float after its legal victory on Monday, when a Paris court ruled that the consulting business would only have to pay $830m in compensation to its accountancy sibling in order to gain its independence. The court found that Arthur Andersen had built up a substantial consulting firm of its own.

The accountants will retain the Andersen name, so Andersen Consulting has recruited Landor, the image consultancy arm of WPP Group, to come up with a new one, expected to be announced by the end of November.

Vernon Ellis, international chairman of Andersen, told the Independent on Sunday that there were pros and cons in remaining a partnership, as opposed to floating on the stock market. He said that the advantages of floating - including the immediate financial gain, the ability to use shares as an incentive to staff and the chance to use the company paper for acquisitions - had to be weighed against the burden of being a public company. "We don't have a need for capital and we don't have a need for more scale," Mr Ellis maintained.

An alternative was suggested by Ian Watmore, who recently became UK managing partner of the consultants. He believes that the group will end up having a hybrid structure, with listed subsidiaries of the main partnership.

Andersen already has a venture capital operation, which invests over $200m a year in businesses built up by the firm - joint ventures with the likes of BT and Microsoft - and is putting $100m into a worldwide loyalty fund, which pays out to employees who stick with the group. Any or all of these businesses could end up being floated or incorporated in a listed subsidiary.

The consultancy firm currently has 1,280 partners world-wide - a tenth of whom are in the UK. Next month it plans to double the number of partners in the biggest expansion in its 80-year history.

This expansion, which was signalled in the Independent on Sunday in April, will see the consultants shake up its structure, bringing in new blood in an attempt to retain staff and see off the threat from e-commerce firms.

Andersen is also launching an aggressive recruitment drive. In the UK it is looking to recruit up to 1,500 consultants, increasing the size of the firm by nearly a third.

Mr Watmore says that the firm has been growing at an unprecedented rate. It benefited greatly from the work that had to be done ahead of the millennium to deal with the threat of the Y2K bug. Since then, Andersen has seen a massive growth in e-commerce-related business, working on projects that have included a business-to-business exchange for the oil industry and an interactive digital television launch for CWC Communications.

This area is expected to grow as companies come to terms with working in the new economy. "Existing workforces need to be reskilled," said Mr Watmore. "And old technology issues need to be resolved - for example, how to make reliable, large-scale technology projects happen. It's getting quite 'back to the future'."

One technology issue that will not go away is the National Insurance computer, NIRS II, which Andersen had a great deal of trouble completing on schedule.

This project, which is now up and running, was criticised again last week by the House of Commons Public Accounts Committee. Mr Watmore, who was involved in NIRS II, says their criticisms, which included an attack on the £14m fee the Inland Revenue would have to pay if Andersen were to be kicked off the project, were "out of date".

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