The deal would expand KPMG Consulting's portfolio, staff and list of clients significantly, putting it in a better position to compete against other IT services providers, such as IBM, Electronic Data Systems (EDS), Computer Sciences, Deloitte Touche Tohmatsu's Deloitte Consulting unit and PricewaterhouseCoopers' PwC Consulting unit.
KPMG Consulting is offering $284m (£195m) to buy up to 23 of Andersen Worldwide's business consulting units, which provide IT and business management services. Up to 6.5 million of KPMG Consulting shares would also be issued over a three-year period to Andersen consulting partners.
The letter of intent includes the unit from Arthur Andersen, which is Andersen Worldwide's US firm, KPMG Consulting said in a statement yesterday. The other units on the table are in Asia-Pacific, Europe and Latin America.
KPMG Consulting already has completed the acquisition of two of the 23 units on the table: the China and Hong Kong IT consulting practices.
The 23 units generated $1.4bn in revenue in Andersen Worldwide's 2001 financial year ending 31 August, 2001. That is about half of KPMG Consulting's total revenue of $2.9bn (£1.9bn) in its 2001 fiscal year, ending 30 June, 2001. KPMG Consulting's staff would grow from about 9,000 to more than 16,000 employees if it manages to acquire the 23 units it intends to buy.
Andersen Worldwide, based in Switzerland, and its US firm Arthur Andersen, based in Chicago, are struggling to survive their involvement with bankrupt energy trader Enron. Arthur Andersen was Enron's auditor, and Enron's accounting practices are at the centre of the scandal that brought down the company.
As a result of the Enron debacle, Arthur Andersen faces numerous lawsuits, a criminal trial on an obstruction of justice charge and a client exodus. It pledged earlier this year that it would transform itself into a company that provides only auditing services and that it would get rid of its other consulting units.
KPMG Consulting's acquisition of Arthur Andersen's business consulting unit "is subject to the satisfactory resolution of potential liability issues" on the part of Arthur Andersen, the statement said.
KPMG Consulting is a publicly traded company no longer associated with its former parent company, KPMG International.