Carving up the flagship office
Deloitte, KPMG lead recruitment chase
By Julie Johnsson
May 06, 2002
Crain's Chicago Business
Competitors of Chicago's Andersen are carving up its home office — the accounting firm's birthplace and flagship location — with deals for the once-vaunted audit practice here expected to be completed this week.
Andersen's rivals are also negotiating for many other components of its Chicago business, including the middle-market practice, financial services group and business consulting. Deloitte & Touche LLP, based in Connecticut, and New York's KPMG LLP have been the most aggressive in vying for Chicago partners.
The frenzied negotiations, touching nearly all of Andersen's operations in its largest office, signal that the accounting giant's future can be measured in weeks, not months, regardless of the outcome of its litigation in Houston and Phoenix.
"If that office goes, it means basically that the firm has been killed," says Stephen Presser, professor of business law at Northwestern University's Kellogg School of Management.
The dealmakers got a boost Friday when a federal judge in Chicago refused to grant a temporary restraining order that would have blocked Andersen from canceling any non-compete agreements for 14 days. Andersen is charging would-be acquirers a bounty of $100,000 per partner to drop the non-compete restriction.
Up for grabs
A host of competitors are vying for pieces of Andersen's Chicago home office. They include:
Audit
Deloitte & Touche, KPMG, Ernst & Young
Tax
Deloitte & Touche, KPMG, PricewaterhouseCoopers
Middle Market
BDO Seidman, Grant Thornton, PricewaterhouseCoopers
Business Consulting
KPMG Consulting Inc.
Meanwhile, Deloitte & Touche and KPMG are battling for partners and senior staff in Andersen's commercial group, a marquee practice that once boasted a blue-chip client roster that included, in the Chicago area, Abbott Laboratories, Sara Lee Corp. and Walgreen Co.
Now, the Big Five rivals are bidding for staff — often at the request of former Andersen clients who wish to see familiar faces even though they're changing accounting firms. Representatives of Andersen, Deloitte and KPMG did not return phone calls.
Deloitte extended offers to 22 Andersen partners in the commercial group and 108 senior staff and managers last Wednesday, a source says. They have until Monday to accept or reject its terms. KPMG also extended competing offers to many in the group last week.
Leading the exodus to Deloitte is Deborah DeHaas, who is Andersen's top audit partner in Chicago as head of its assurance and business advisory practice. She is prominent in local civic circles, and headed the firm's Chicago office until last fall, when she returned to client duties.
The team of executives joining her includes Barry Kohn, a lead partner on the Sara Lee account and a rainmaker. Neither Ms. DeHaas nor Mr. Kohn could be reached for comment.
KPMG has lined up its own roster of Andersen all-stars, a source says. It has hired Stan Logan, who ran the audit practice before Ms. DeHaas and who was regarded as one of the firm's top salesmen for his work with Quaker Oats Co. and Walgreen. He could not be reached for comment.
Andersen has agreed to release partners and senior managers from their non-compete agreements, provided the acquiring firms pay $100,000 per partner and agree to take eight staff members for each partner they hire, sources say.
Staff scramble
This led to intense behind-the-scenes lobbying at Andersen last week as partners who've committed to either firm sought to persuade colleagues and rising stars to join them.
Deloitte, meanwhile, is the front-runner to gain the bulk of Andersen's tax practice, negotiating to hire about 350 tax partners nationwide, including about 30 in Chicago, along with their key staff. KPMG also has approached tax partners here, sources say. Both firms stand to see their Chicago offices swell by hundreds of employees as they hire Andersen tax and audit staff.
The two remaining Big Five firms are vying for smaller pieces of the Chicago office. New York's Ernst & Young LLP is in talks to acquire Andersen's financial services practice.
PricewaterhouseCoopers LLP, based in New York, is also in the running to acquire Andersen's tax practice and is in talks to buy the middle-market practice here, which serves companies with revenues of $100 million to $1 billion. A spokesman for PricewaterhouseCoopers couldn't be reached.
Chicago-based accounting firms Grant Thornton LLP and BDO Seidman LLP are also negotiating with partners in that practice in Chicago and elsewhere, sources say.
An executive at BDO Seidman confirmed the firm is in talks, but declined to provide details. Grant Thornton issued a statement saying, "While our discussions with Andersen are preliminary, we will have no comment until there is a significant development."
The fate of ABC
Virginia-based KPMG Consulting Inc. emerged as the leading candidate to acquire the $800-million Andersen Business Consulting unit (Crain's, April 8). The consulting group's 38 Chicago partners had weighed other options but have decided not to cut separate deals for their practice here, which has a total of 508 employees, until the KPMG talks are resolved.
All deals, of course, are contingent on Andersen resolving its liability and non-compete issues. If the firm dissolves, the assorted parties suing it for damages will be hard-pressed to collect from departing partners who violate non-compete agreements, notes Robert Schweihs, managing director of Willamette Group, a financial advisory firm based in Chicago. "I can't compete with Andersen if they don't exist."
Reporter Sarah A. Klein contributed to this story.
©2002 by Crain Communications Inc. |
