Getting closer to a top?: "
New Andersen Consulting Venture Unit
To Invest $1 Billion in Web Businesses
By ELIZABETH MACDONALD
Staff Reporter of THE WALL STREET JOURNAL
Andersen Consulting said it is forming a venture-capital unit that will invest
$1 billion over the next five years in new e-commerce businesses, marking
one of the biggest proposed forays by a consultant into the frenetic Internet
world.
The new unit, called Andersen Consulting
Ventures, will be headed by Jack Wilson, 52 years
old, previously Andersen's managing partner in
charge of global markets.
Andersen is plunking $500 million of its own cash
in the new unit; the remainder is expected to come
from yet-to-be announced venture-capital firms
and investment banks.
With this unit, "Andersen Consulting will continue
to lead the way in the new e-economy," said Joe
W. Forehand, managing partner and chief
executive of Andersen Consulting.
In an interview, Mr. Wilson said the new unit especially will scrutinize
e-businesses that "create virtual markets for the exchange of goods over
the Internet," anything from industrial chemicals to beauty products to
computer supplies. Mr. Wilson also said the unit plans to take equity
stakes varying from 2% to 51% in incubating dot-com companies
sprouting in North America to Europe and Asia. The new venture, to be
based in Palo Alto, Calif., will keep Andersen "well-positioned to help
entire industries change and grow much faster," said Mr. Wilson.
Andersen's new unit, which Mr. Wilson said will provide seed money
"early to help incubating companies come to life," joins a rarefied group of
a handful of $1 billion venture-capital funds, as most funds are in the $150
million to $800 million range.
The debut of Andersen Consulting Ventures comes at a time when
consultants are forging more direct financial linkups with high-tech
concerns. For example, Big Five accountants Ernst & Young recently
announced it is in talks to sell its entire management-consulting business to
Cap Gemini Group SA, a Paris computer-consulting company, in a deal
that could exceed $4.8 billion. And KPMG is zipping ahead with its plan
to sell a 19.9% stake valued at $1.05 billion in a big portion of its
consulting arm to Cisco Systems Inc., the San Jose, Calif. computer
networker.
But the more consultants become tightly knit with outside companies, the
more questions about possible conflicts pop up.
Traditionally, consultants have kept an arm's length relationship with
corporations. The increase in the number of these kinds of deals raises the
question, "how objective can a consultant be?" wonders Tom
Rodenhauser, a consulting-industry analyst.
For example, Mr. Rodenhauser says Andersen could be tempted to
cross-sell consulting advice aimed at short-term results, like cutting
research and development budgets, in order to boost Andersen's own
short-term gains in the dot-com companies. And Mr. Rodenhauser asks,
will Andersen's current corporate clients feel threatened by Andersen's
investments in their competitors?
Mr. Wilson said to the contrary, Andersen isn't looking for quick,
short-term gains. Instead, he says the unit will be separate from Andersen
Consulting and will "maximize the market values of the entities we invest
in." He also said the unit isn't placing any requirement on these new
start-ups to hire Andersen "to do consulting work for them." And Mr.
Wilson added Andersen doesn't "intend to invest in direct competitors of
companies we already own stakes in, or who compete with our existing
clients."
At any rate, Mr. Rodenhauser says Andersen's Internet picks could
provide "a market signal" to investors as to which dot-com companies are
worth investing in. Already, Andersen has made a raft of investments
valued at about $40 million in Internet start-ups, and has embarked on
numerous joint alliances with companies.
For example, Andersen has recently invested in ChemConnect Inc., the
Internet's biggest global chemicals and plastics exchange that is causing a
big buzz in the e-commerce arena." |
