Enron Fallout? PwC Consulting To Split From Parent Company

PwC Consulting PricewaterhouseCoopers

Thomas O'Neill was named new CEO of PwC. O'Neill joined the company in 1967 in Toronto and has served as PricewaterhouseCoopers' chief operating officer since July 2000.

PricewaterhouseCoopers said it expects to file a registration statement with the SEC for PwC's initial public offering some time in the spring.

PricewaterhouseCoopers and PwC Consulting executives declined to comment on Thursday's news. PricewaterhouseCoopers' CEO, Samuel DiPiazza, however, told The Wall Street Journal the IPO move is "a response to the crisis around the Enron and Arthur Andersen LLP failure and the confidence crisis in our own profession."

"We recognize, like so many people, that the Enron failure has created a huge crisis in confidence," DiPiazza told the Journal.

But some observers, including Stephen Lane, market analyst with Boston-based Aberdeen Group, doubt the Enron/Andersen scandal alone is behind the move.

"Disingenuous is too strong a word," said Lane. "But to say this is a direct response to the Enron issue, well, I don't think is entirely the case. Just look at the last couple of years."

For instance, in September 2000, Hewlett-Packard reportedly was willing to pay up to $18 billion for PwC Consulting. By November, however, the companies broke off discussions, with HP CEO Carly Fiorina citing "market conditions" as the central reason the bid was dropped.

Meanwhile, said Lane, the Enron/Andersen debacle may have provided a timely reason for PricewaterhouseCoopers to act, but the combination of the tax audit, accounting and consulting model people once referred to as the Big Five hasn't really existed since Andersen and Accenture went their separate ways a couple of years ago.

"In fact, with this announcement, you've only got two companies that still have accounting and consulting joined at the hip: One is Andersen and the other is Deloitte [Touche Tohmatsu," said Lane.

Accenture, however, seemed to be feeling the heat of its former association with Andersen. In response to media inquiries, Accenture released a statement earlier this week to make clear its legal separation from Andersen, dating back to 1989.

"Accenture is not and never has been engaged in the practice of public accounting. Accenture had no involvement in Arthur Andersen's audit services, including services to Enron," the statement read, in part.

In 1990, the U.S. Securities and Exchange Commission formally recognized Accenture LLP as an entity separate and distinct from Arthur Andersen LLP. In addition, according to the statement, in August 2000, based on an arbitrator's decision in the International Chamber of Commerce proceedings commenced by Accenture in 1997, all remaining historical contractual ties between Arthur Andersen and Accenture were completely severed.

Lane also noted other recent moves by the so-called Big Five to separate their consulting units. Last year, KPMG Consulting was split from KPMG LLP in an initial public offering and now trades on Nasdaq. A year before that, Paris-based Cap Gemini bought the consulting arm of Ernst and Young.

The driving factor, said Lane, was former SEC Chairman Arthur Levitt Jr.'s push to remove consulting and auditing practices contained under the same limited partnership umbrella, due to a possible conflict of interest and accompanying liability.

Last year, PricewaterhouseCoopers sold its U.S. Corporate Value Consulting business to Standard and Poor's for about $120 million, and its human resource outsourcing business, Unifi Network, to Mellon Financial for $275 million.

PwC Consulting represents approximately one-third of PricewaterhouseCoopers' annual revenue of about $22 billion and employees about 35,000 professionals around the world.

PricewaterhouseCoopers also announced dual headquarters in New York and Amsterdam. In addition, Willem Brocker, of Amsterdam, was named a managing partner, global markets, and Amyas Morse, of London, was named a managing partner, global operations.