Consulting firm wins split right

By FIONA ROTHERHAM

Andersen Consulting, the world's largest consulting firm, has won a ruling allowing it to split from Andersen Worldwide and Arthur Andersen after a lengthy battle over money.

Both sides claimed victory after the ruling by an arbitrator from the Paris-based International Chamber of Commerce, but Arthur Andersen's chief executive, Jim Wadia, resigned within hours of the verdict.

It will be business as usual for Andersen Consulting's New Zealand clients, said managing partner Jack Percy."This has always been a back office and governance dispute and has really not had any impact on our work with clients."

Andersen Consulting has 130 New Zealand staff compared with the 210 employed by Arthur Andersen.

"We have no problem competing with them. The problem we had was competing with them while paying them a lot of money each year," Mr Percy said.

The consulting firm will have to change its name by the end of the year and forfeit about $US1.2 billion in past payments to the accounting firm. But Arthur Andersen, which had claimed a break-up fee as high as $US14.5 billion, is not entitled to any future payouts.

In 1989 the firms created two separate entities for consulting and accounting, under the umbrella of Andersen Worldwide. Problems started after Arthur Andersen set up its own consulting business in 1994.

Andersen Consulting took its case for independence to the International Chamber in 1997, claiming the accountancy firm had broken an agreement to share revenue as long as they did not compete on projects.

The consulting arm's 1300 partners had made annual payments to Andersen Worldwide since it was established of around $US200,000 per partner.

The split comes as other consulting firms try to free themselves from their slower-growing audit and tax counterparts. Consultants also want to escape rules governing conflict of interest for accounting firms as the US Securities and Exchange Commission is about to toughen them.

The ruling allows Andersen Consulting to consider moves such as joint ventures, a sale of the company or a share sale.

The consulting company is keen to make further investments in information technology and dotcom companies both here and overseas where it can add strategic and management value, Mr Percy said.

Last month it took a 25 per cent stake in San Francisco e-procurement company Epylon, which it hopes to bring to New Zealand if it gets the job of putting together an e-procurement system for the public sector.

Andersen Consulting plans to spend around $US100 million on the name change. It was a move that had to happen anyway, Mr Percy said.

At a recent prizegiving for the Andersen Consulting Matchplay Golf Championships in San Diego the man handing out the prize referred to Arthur Andersen.

"There has always been confusion despite our best attempts."