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Tuesday, June 21, 2005

Consulting firm needs a consulting firm?

I thought consulting firms had it made. I guess not. This article was pointed out to me from a close friend who works at A.T.K.

EDS to sell A.T. Kearney
Tuesday June 21, 12:31 pm ET
Electronic Data Systems Corp. has decided against a management buyout of its management consulting business A.T. Kearney, and has decided instead to sell the business, an EDS spokesman said Tuesday.

"We believe it's in the best interests of our clients and EDS to pursue a third-party sale," said EDS spokesman Travis Jacobsen.

EDS (NYSE:EDS - News) expects to complete the sale by the end of September. Jacobsen declined to comment on potential buyers.

The Plano-based technology company is in discussions with Monitor Group, according to a Wall Street Journal article Tuesday quoting sources close to the situation.

Cambridge, Mass.-based Monitor is a privately owned consulting and advisory firm.
Alan Kantrow, Monitor Group's chief content officer, was not immediately available for comment.
EDS bought Chicago-based A.T. Kearney in 1995 for more than $600 million. In February, EDS said it planned to ask A.T. Kearney to take part in a management buyout. A.T. Kearney has been seen by analysts as a drag on EDS' performance.

A.T. Kearney posted an operating loss of $10 million and generated about $806 million in revenue in 2004. The company has about 3,000 employees.

EDS is looking to make about $1 billion in cuts this year as part of a cost-savings plan. In a separate announcement Tuesday, EDS said it plans to sell its global real estate business to Dallas-based Trammell Crow Co. (NYSE:TCC - News).

EDS to sell A.T. Kearney
Tuesday June 21, 12:16 pm ET
NEW YORK (Reuters) - Electronic Data Systems Corp. (NYSE:EDS - News), the world's second-largest consulting firm, said on Tuesday it plans to sell its A.T. Kearney management consulting unit instead of pursuing a management buyout as it had previously planned.

Cambridge, Massachusetts-based consulting and investment firm Monitor Group Inc. is in talks with EDS to buy the unit, according to The Wall Street Journal, citing people familiar with the situation.

"EDS is not pursuing a management buyout of A.T. Kearney by the consulting firm's officers," company spokesman Terry Balluck said. "EDS is pursuing a third-party sale."

Bob Brand, another EDS spokesman, said the company expects the sale to occur by the end of the third quarter.
EDS would not comment on any potential offers for the unit. Nor would Alan Kantrow, Monitor chief content officer, say whether his company is looking at A.T. Kearney.

Monitor is less than half of the size of A.T. Kearney, generating about $300 million revenue a year, mostly from advisory services.

EDS bought Chicago-based A.T. Kearney in 1995 for about $300 million. The unit has suffered from a slowdown in demand for consulting services in recent years.

"EDS was not able to sufficiently leverage the AT Kearney asset due to cultural gaps and the natural tendency for management consultants to desire independence," Bernstein analyst Rod Bourgeois said.

EDS Chief Executive Michael Jordan, who had an early career as a consultant with McKinsey & Co., said a month ago that a straight sale would not work. The company recently notified A.T. Kearney of the change of plan, saying that selling the business to another company will be in the best interest of all parties.

"I think EDS is essentially indifferent between a management buyout and a straight sale," Bourgeois said, "as the cash EDS will raise is not needed and the effect on our EPS estimates will be immaterial."

Separately, EDS said it would outsource the management of its global real estate function to Trammell Crow Co. (NYSE:TCC - News) as part of its global facilities consolidation plan.

EDS will also sell 20 company-owned properties and lease back a portion of them within the next few months. It expects the efforts to generate about $200 million in cash in 2005 and $200 million in cost savings over the next three years.

EDS shares fell 3 cents to $19.68 in midday New York Stock Exchange trading.


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