Accenture announced its long-anticipated intention to go public last week. But it chose to put forward just a piece of the firm. Accenture hopes to raise upwards of $1 billion. That’s about 10 to 20 percent of the firm. More important than the money, partners want to retain controlling interest in the business.

Roughly $600 million will be used to restructure the partnership into a corporate entity. And there is a lengthy lock-up period for partners (six to eight years). Those aren’t the terms of a greed play. Accenture is willing to forego the billions that might otherwise have been raised had the entire company gone public.

Realistically, Accenture needed to create the stock currency for acquisitions and deals—partners were tired of digging in their own pockets to put up money for new initiatives.

Accenture also knows that the ridiculous valuations of the past few years were just that—ridiculous. KPMG Consulting raised $2 billion under terrible conditions: The market was cratering and the company had to deal with the accounting albatross. Accenture could be worth 10 times that when one considers the Andersen Consulting brand and track record.

But to float that idea, Accenture would need to suck some helium. Yes, Accenture is the industry’s biggest player, but consulting firms and public markets are a mixed bag.

That’s why Accenture wants to be a multibusiness professional services firm, not just a consultancy. By evening out the cyclical consulting business with venture capital/outsourcing/operating companies, Accenture becomes much more appetizing to investors.

Such is the long-term scenario. Right now, Accenture needs to put the proverbial wheels in motion. So the company opts for a conservative IPO that calls for restraint over greed. But when the market climbs out of its slump by early fall and renewed demand in the IT services sector drives consulting revenues, Accenture could be well positioned to ride a rising wave.

Heard on the street
Overshadowed by the recent billion-dollar deal to buy Informix, IBM last week acquired Mainspring, the Cambridge, MA, “digital” business strategy firm. IBM’s Business Innovation Services—the consulting arm of IBM Global Services—is putting Mainspring CEO John Connolly in charge of IBM’s strategy and change practice. The deal was valued in excess of $80 million, or roughly $286K per consultant. Seems a bit pricey unless one factors in the cash reserves from Mainspring’s previous financing rounds, which exceeded $32 million.
Inside Consulting is written by Tom Rodenhauser as a free weekly supplement to The Rodenhauser Report. The report informs senior advisors and business executives of consulting trends and best practices. Subscription cost is $295 per year for 10 issues. Copyright 2001, Consulting Information Services, LLC. Reproduction is prohibited. Quotation with attribution is encouraged.