By Simon Hodgson
Ernst & Young’s consultancy arm looks like it will be the latest in a string of Big Five consultancy divisions which are either being spun off or made independent internally. Cap Gemini yesterday confirmed that it is in talks with Ernst & Young with a view to acquiring its consulting wing. Cap Gemini was quoted in UK news reports over the weekend as offering 3bn pounds ($4.8bn) for the consulting division.
The picture is the same for several other major consultancies. Andersen Consulting is currently trying to disengage from its accountancy unit Arthur Andersen. PricewaterhouseCoopers says it will either float off its consulting wing or make it independent through strengthening Chinese walls internally. And Cisco has made a $1bn bid for KPMG’s consulting arm.
The move away from parent companies comes as a result of the increasing pressure consultancy divisions are coming under from two sources. The first is established services names like Cap Gemini and IBM Global Services. The second comes from young pure-play e-commerce firms such as Razorfish.
US research analyst Forrester Inc has predicted that the consulting arms would be interested in snapping up independent services firms such as USWeb/CKS and Viant. The Cap Gemini deal seems a reversal of that forecast, a services firm with enough clout to buy a consultancy division. Ernst & Young would heighten Cap Gemini’s profile considerably, while raking in revenue that could turn it into a $8bn firm.
