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KPMG to delay IPO?
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November 10, 2000: 2:50 p.m. ET
IPO delay slides consulting firm into 1Q after big names incl. Verizon
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NEW YORK (CNNfn) - KPMG Consulting Inc. downplayed Friday the likelihood that it would launch its highly anticipated IPO this year, the latest indication that this year's bumper crop of fourth-quarter IPOs are quietly drifting into the first quarter of 2001.
KPMG Consulting declined to comment on the specific timetable for its IPO that it had hoped to launch this year but did say the unit has yet to complete the registration process with the SEC, a spokeswoman told CNNfn.com.
"We have never set a date for our IPO," a KPMG Consulting spokeswoman said Friday.
The new issue, which has been in the works since fall 1998, would be the first time a unit of global accounting firm would attempt to launch its IPO.
Underwriters on the deal also did not have a schedule for the new issue.
Sliding into 1Q
Fourth quarter is traditionally one of the strongest times for the IPO market. Last year, six companies -- including VA Linux Systems Inc. (LNUX: Research, Estimates), Foundry Networks Inc. (FDRY: Research, Estimates) and FreeMarkets Inc. (FMKT: Research, Estimates) -- produced Top 10 record-breaking debuts in the period.
But this year's fourth quarter is emerging as a mere shadow of 1999's rousing IPO market. A delay of KPMG Consulting's IPO would signal that many of the big names are waiting until first quarter to launch their offerings.
Verizon Wireless decided recently to push its IPO into next year. News Corp (NWS: Research, Estimates) Chairman and Chief Executive Officer Rupert Murdoch disclosed last week that the Sky Global Networks IPO could also slide into first quarter. Nextel International, whose IPO was also expected in November, is now "to be announced" and could move into next year.
The Verizon Wireless issue, originally expected in September, could raise as much as $5 billion. KPMG Consulting's offering, valued in May at $1 billion, was expected sometime in fourth quarter.
KPMG, the global accounting firm, disclosed in fall 1998 that it would be looking at alternatives to "monetize" the value of its consulting business, which would include an IPO. The accounting firm began discussing a spinoff and IPO of the consulting unit with the Securities and Exchange Commission in 1998.
After nearly two years, KPMG Consulting first filed for its IPO in May and an IPO was expected this year, in what would have been the first public offering of shares in a unit of one of the Big Five firms. While KPMG Consulting had hoped to complete the IPO this year, the firm had never set a formal date, a KPMG Consulting spokeswoman said.
The process of going public is much more complicated for KPMG Consulting since it is being spun off from a tax and audit firm.
"We are not a normal IPO," the KPMG Consulting spokeswoman said. "We have been in a complex process of separating from our brethren."
KPMG Consulting also declined to comment on reports that poor market conditions pushed it to delay the IPO to next year.
"We certainly watch the markets like everyone else but the offering is not effective with the SEC," the spokeswoman said. "We are still in the registration process."
Morgan Stanley Dean Witter is lead underwriter on the deal.
Signs that KPMG Consulting would delay its IPO were first reported by the Financial Times. The report comes six weeks after KPMG Consulting Inc. raised the number of shares it planned to list publicly to 367 million from 324 million. Cisco Systems Inc. (CSCO: Research, Estimates), the world's biggest maker of computer networking equipment, would hold about a 10 percent stake in the firm.
Changes in accounting
Audit and business services firms have been undergoing big changes in recent months. PricewaterhouseCoopers said in September it was in talks with Hewlett-Packard Co. (HWP: Research, Estimates) toward a sale of PwC's management consulting unit to the PC and printer company for about $18 billion in cash and stock.
Andersen Consulting recently won clearance to separate itself from audit firm Arthur Andersen, ending years of acrimony between the businesses, and the consulting arm is working toward its own IPO. And earlier this year, Ernst & Young sold most of its consulting unit to Cap Gemini, a French computer services and advisory firm, for nearly $11.3 billion. 
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