Cap Gemini Eyeing Ernst & Young Business Unit S. McVey - December 13th, 1999
Event Summary
Number four of the Big Five consulting giants, Ernst & Young LLP announced that it may sell its consulting business to Cap Gemini SA. Although no details of the proposal have been made public, a spokesman for E&Y said the move was designed to eliminate conflicts of interest between the firm's audit and consulting businesses. At roughly $8.5 billion in revenue, the combined services firm would rival Andersen Consulting in size.
Market Impact
If it occurs, the sale would divest E&Y of roughly 40% of its revenues and provide Europe-based Cap Gemini with a considerably enhanced profile in the U.S., where support for its integration services has been weak. Previous moves by Cap to build its U.S. market have yet to improve its visibility, as in the $200 million acquisition of U. S. telecommunications services firm Beechwood last April. By selling its consulting arm to a competitor, Ernst & Young stands to avoid the kind of battle underway between Arthur Andersen and Andersen Consulting, the audit and consulting brethren of Andersen Worldwide.
User Recommendations
Thus far, there has been nothing more than talk about the sale. Clients in the U. S. that rely on E&Y for business services should have little cause for alarm if the proposed sale does occur. Cap Gemini is likely to avoid making rash structural or personnel changes to E&Y, seeking rather to align its U.S. organization to E&Y's more established model. Existing and future clients should be encouraged by the prospect of the division of E&Y, which carries the happy consequence that their implementation partner will no longer be eyeing their books.