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.
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.
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.