InformationWeek

January 8, 2001

IPO Still On For KPMG Consulting

espite turbulent times in the stock market, KPMG Consulting LLP is moving forward with plans for an initial public offering early this year. The systems-integration and E-services provider, which has $2.4 billion in annual revenue, recently amended its filing with the Securities and Exchange Commission to put a price estimate on its shares and indicate that it expects an offering of more than $2 billion.

KPMG Consulting plans to use about $215.4 million of the proceeds from the IPO to repurchase stock from Cisco Systems, which said in September that it's reducing its stake in KPMG Consulting from 19.9% to 9.9%. When the IPO is complete, auditor KPMG LLP, the consulting firm's parent company, will be left with about 20% of KPMG Consulting. After the sale, the consulting firm will have greater freedom in partnering and accepting equity in clients than it does while affiliated with an accounting firm, which creates potential conflicts of interest concerning audit clients.

But the financial climate has turned much colder since May, when KPMG Consulting disclosed its IPO plan, prompting some analysts to question if this is the right market even for a profitable, established company. "I'm shocked that they haven't canceled their IPO," says Consulting Information Services analyst Tom Rodenhauser. "It's not as though they're being pushed by venture capitalists." Officials at KPMG Consulting declined comment on the IPO.

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