Accounting for the big five breakups. (News Analysis).

For PricewaterhouseCoopers LLP, "Monday" never came. That's the name the huge accounting and consulting firm came up with for its consulting division, which it was preparing to launch in an initial public offering. But between the announcement this past summer and the unscheduled IPO, PwC changed its mind and sold the division to IBM Corp. for $3.5 billion.

That's considerably less than Hewlett-Packard Co. had offered for the consulting unit two years ago, and at just 0.7 times revenues, industry experts say IBM got a real steal. Consultants News editor James Scheer says the price compares poorly with the 2.78 times revenues that Ernst & Young LLP bagged from the sale of its information technology unit to the French outfit Cap Gemini.

"PwC overpriced the IPO deal, so when the market dropped, they took what they could get," remarks Arthur Bowman, editor of Bowman's Accounting Report based in Atlanta.

Being late to the party certainly hurt PwC. But for almost all the Big Five firms, breaking up has been hard to do, a painful process brought on gradually by internal warfare over auditing vs. consulting, a growing sense of conflicts of interest and the intense focus on auditing following the collapse of companies like Enron Corp. and WorldCom Inc.

Even Ernst & Young, which appears to have gotten the sweetest deal, misses its partners. "We were the first firm to say that this was the right business decision, and we recognized the potential for conflict of interest," says Ken Kerrigan, a spokesman for Ernst & Young. "But our revenues are lower now, and partners take home less money because the pool is smaller. It's been very painful."

With the breakup of Arthur Andersen, the former Big Five is now being called the "Final Four." Ironically, Andersen's consulting side is still alive and flourishing, having split off two years ago under the new name Accenture. Andersen got just $1 billion for that sale--some experts valued it as highly as $14 billion, sources say-- and nothing when a group of its internal auditors were hired away a few months ago by Protiviti Inc., a new subsidiary of Robert Half International.

An amalgam of economic, political and cultural forces have combined to make it unlikely that consulting and auditing services can remain under one roof or even one umbrella organization. The Enron debacle and the withering spotlight on Andersen's auditing helped foment "zero tolerance" demands at last spring's round of animal meetings for companies to separate auditing and consulting services. Sara Lee Corp., Johnson & Johnson and The Walt Disney Co. were among the companies that felt the displeasure of restive shareholders and acted to separate their auditing and consulting services. Congressional actions, including provisions in the Sarbanes-Oxley Act, have made the separation imperative.

"We were in situations where clients were having to choose between Deloitte & Touche and Deloitte Consulting," says John L'Abate, a spokesman for Deloitte Consulting, which announced its departure from the association with Deloitte Touche Tohmatsu, the worldwide umbrella organization for the auditing and consulting sides. By year-end, the consulting operation is expected to be a separate, private firm known as Braxton. Scheer estimates the sale price at $2 billion to $5 billion.

But as the bitter dispute between Arthur Andersen and Andersen Consulting two years attests, sharply contrasting cultural forces create a gulf between consultants and accountants that make co-existence increasingly more difficult.

The concept that professional services firms could become "one-stop shops" was ever harder. "Consultants fly first-class, they work shorter hours -- auditors work 15-hour days in tax season -- and a lot of resentment can build up," says Scheer.

Still, the "Final Four" retain an array of tax consulting and financial advisory work. They also will be handling such assignments as helping companies with post-merger integration and other advisory services. Industry analysts speculate that it is just a matter of time before the accountants drift back into performing assorted consulting services, perhaps even rebuilding lost units. "Cap Gemini's non-compete agreement with Ernst & Young runs out next year," Scheer notes.

Money-making opportunities may be too hard to resist, thinks Scheer. "Since [the Final Four] are so familiar with their clients," he adds, "they could help them by suggesting a new information technology system after a merger instead of just fixing up the old system. Where do you draw the line between consulting and helping a client after a merger?"

A Big Five Breakup Scorecard

Division                        Key Date    Result

Arthur Andersen
Andersen Consulting             8/7/2000    New firm, later renamed
                                            Accenture

760 employees at AA's internal  6/4/2002    Recruited to form core of
auditing and risk consulting                new firm, Protiviti Inc.
services

Deloitte Touche Tohmatsu        2/6/2002    Deloitte Consulting --
Consulting practice                         scheduled to be renamed
                                            Braxton

Ernst & Young LLP               5/23/2000   Cap Gemini/E&Y
Consulting practice

KPMG LLP                        2/7/2001    KPMG Consulting -- new
Consulting practice                         name pending

PricewatehouseCoopers LLP
Global Business Consulting and  7/30/2002   Purchased by IBM Corp.
Technology Services Unit

Business Receiver Services      7/19/2002   Bought by FTI Consulting,
                                            Annapolis, Md.

Unifi Network                   11/29/2001  Bought by Mellon
                                            Financial Corp.

National Tax Services           2/28/2002   Bought by Clark/Bardes
                                            Consulting, Barrington,
                                            IL

Corporate Value Consulting      8/7/2001    Bought by Standard &
                                            Poor's Corp.

Division                        Price

Arthur Andersen
Andersen Consulting             $1 billion


760 employees at AA's internal  none
auditing and risk consulting
services

Deloitte Touche Tohmatsu        $2 billion to
Consulting practice             $5 bilion (est.)


Ernst & Young LLP               $11.1 billion
Consulting practice

KPMG LLP                        $2.02 billion
Consulting practice             (IPO)

PricewatehouseCoopers LLP
Global Business Consulting and  $3.5 billion
Technology Services Unit

Business Receiver Services      $230 million


Unifi Network                   $275 million


National Tax Services           undisclosed


Corporate Value Consulting      undisclosed


Source: Company data

Paul Sweeney is a freelance business writer in Brooklyn, N.Y., who writes regularly for Financial Exeutive.