KPMG sells remaining consulting operations to Atos Origin for £423m

KPMG attempted to address worries about accountancy firms owning lucrative consulting businesses yesterday by selling its remaining consulting operations to the Dutch company Atos Origin for €657m (£423m).

The firm has been trying to sell the business in the UK and the Netherlands for six months. It said the deal was delayed by the turmoil created by 11 September and by the collapse of the energy giant Enron, which led to allegations that its auditors Andersen colluded with directors at the company.

KPMG decided four years ago to separate accountancy from consultancy due to problems of potential conflict of interest and sold its US consultancy business in 1999.

Other firms, including Ernst & Young and Andersen itself have since split the two sides of the business.

But the issue has come back into the spotlight since Enron's problems emerged and other firms are under pressure to sell any consulting businesses which remain within the parent organisation. This includes Andersen because, having sold off one consultancy business, a second one has grown up within the main accountancy business.

KPMG's deal with Atos will net large windfalls for the partners at KPMG's consulting and accounting arms, but the firm said "a substantial amount" of the money would be reinvested in KPMG's business.

The transaction also includes incentives for consulting partners, who will receive warrants relating to a maximum of 1.41 million new Atos shares, should they meet profitability and performance targets in 2002 and 2003.

Atos, majority-owned by the Dutch electronics giant Philips, is unlikely to make any of the 2,800 KPMG Consulting employees from the UK and the Netherlands redundant.

The new business will trade as Atos KPMG Consulting for the next three years. The UK operation will continue to be run by Jeremy Andersen, managing partner of KPMG Consulting in the UK, and he will join Atos' board.

The deal, due to be completed by 1 July, will see Atos pay €422m in cash and €235m in convertible bonds for the business. It will pick up clients including Vodafone, BP and Diageo.