Arthur Andersen & Co, the big US accounting company is setting a precedent among US accounting firms by seeking outside capital. Andersen is looking for over $250m in the next five years from international capital markets to fund its computer systems consulting arm. Traditionally, accounting firms seek outside capital only for operating expenses and rely on partners’ contributions and related earnings for working capital. The reasons for Andersen’s surprise announcement would seem to stem from problems among its computer consulting staff. For, according to the Wall Street Journal, such consultants have been defecting to other companies offering more pay and status. Consequently, Andersen has set up an autonomous unit for its consulting business and changed its pay and benefits scheme to favour the high revenue earners or consultants as opposed to its auditing and tax partners. Meanwhile, this search for more investment is probably an answer to internal whingeing, since many Andersen consultants were unhappy that the company could not compete with General Motors Corp’s Electronic Data Systems unit, and IBM for the largest computer systems consulting contracts. In a bid to raise the neccessary investment for expansion Andersen may sell its nonvoting preferred stock to institutional investors in Europe. It may also set up a separate leasing unit to acquire its consulting-related computers and software for $100m. This unit would raise funds to buy the nec-essary computer equipment for consulting jobs by selling five-to-seven year and seven-to-10 year debt to institutional investors and insurance companies. If it manages to raise the required sum then a proportion of the capital will go to Andersen’s operations in West Germany, Japan, and Korea. The announcement comes at a time when its turnover from consulting is growing at about 30% a year.
