US-based KPMG Consulting has bought KPMG’s German, Swiss and Austrian consultancy units.

US-based KPMG Consulting Inc has agreed to buy German-based KPMG Consulting AG for $685 million. Both companies are predominantly IT services firms, and used to be part of audit practice KMPG. The US unit floated in early 2001, while the German firm has disengaged itself from the global partnership over the last year.

The deal gives KPMG Consulting a beachhead in Europe – and given that the companies have been affiliates within the KPMG network for many years, integration issues should be less severe than for a normal international acquisition. It’s also welcome news given that KPMG Consulting lost KPMG’s UK and Netherlands consultancy units to French rival Atos last week.

Globally, and especially within the EU, a network that goes across national borders is vital for winning deals. Multinational companies want multinational professional services firms – which is why Andersen’s international members were so quick to leave the global network after the US unit collapsed. Indeed, KPMG Consulting has also agreed to buy Andersen’s business consultancy units in Scandinavia, Japan and Switzerland.

Another key factor in this deal is the trend towards separation between consulting and auditing – which existed before Andersen’s demise, but has certainly been sped up by the reported conflicts of interest there. There’s also a clear trend for consultancy firms to move away from the partnership model towards stock exchange listings, fitting in with the shift away from mutualization that can be seen across all industries.

Of course, the M&A activity in IT services is also market-driven. IT consultancy firms are going through serious difficulties as companies rein in their technology spending – and the belief that that the market they work in might not pick up quickly is becoming increasingly prevalent.

Related research: Datamonitor, 2002: Germany – Management & Marketing Consultancy

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