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KPMG IPO surges 30%
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February 8, 2001: 4:34 p.m. ET
First of the Big 5 units to go public; others may follow; Instinet files for IPO
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - KPMG Consulting Inc., the first public offering from a unit of the Big Five accounting firms, surged 30 percent in its debut Thursday.
After pricing at the top of its expected range, KPMG Consulting gained $5.47 to close its first day of trading at $23.47 on the Nasdaq.
The KPMG Consulting issue is the biggest U.S.-based IPO since AT&T Wireless (AWE: Research, Estimates) $10.6 billion offering last April, and is the largest so far this year.
The KPMG Consulting IPO, the fourth new issue this year, is also considered the first big test of the IPO market.
"Obviously KPMG is an old-line name," said Ben Holmes, president of IPOpros.com. "It's a really encouraging sign to see it trade to a premium like this. The deals up to now have been really spotty."
 McLean, Va.-based KPMG Consulting (KCIN: Research, Estimates) raised $2 billion late Wednesday, selling 112.5 million shares at $18 each, via Morgan Stanley Dean Witter. The company had planned to offer 112 million shares at $16-to-$18 each.
The unit, a spin-off from global accounting firm KPMG LLP, provides Internet consulting to Fortune 1000 firms and has joint ventures with Qwest Communications (Q: Research, Estimates), Cisco Systems, Oracle Corp. (ORCL: Research, Estimates) and Microsoft Corp. (MSFT: Research, Estimates).
However, KPMG Consulting is not a startup dot.com. The consulting firm has about 2,100 clients and is profitable with $2.4 billion revenue for the year ended June 30, which has grown from $727.3 million in 1996.
KPMG has been working on the consulting IPO since August 1998 and filed for the new offering last May. KPMG Consulting was originally expected to go public in fourth quarter of 2000, but was apparently put on hold because of market conditions.
Parent firm KPMG is spinning out the consulting unit into a separate company. After the IPO, KPMG Consulting will no longer be part of KPMG International, the global association of professional services firms that operate under the KPMG name.
Parent KPMG LLP, respective partners and member firms together will hold no more than 19.9 percent of outstanding shares in the consulting unit after the IPO.
In December 1999, Cisco Systems (CSCO: Research, Estimates) made a $1.05 billion investment in the consulting unit in exchange for five million shares. Cisco had planned to take a 19.9 percent stake in KPMG Consulting but cut that stake down to 9.9 percent.
Big 5 IPOs
Since KPMG announced plans for the IPO in 1998, other members of the Big 5 -- which include PricewaterhouseCoopers, Deloitte & Touche, Arthur Andersen and Ernst & Young -- have announced that they are also investigating going public.
Accenture, the former Andersen Consulting, the largest global consulting firm and a former unit of Andersen Worldwide (which is parent to accounting firm Arthur Andersen), is also looking at an IPO.
PricewaterhouseCoopers, the biggest of the Big Five global accounting firms, is also following KPMG's route and eyeing an IPO of its consulting unit. On Nov. 13, Hewlett-Packard ended talks with PwC that would have had the computer maker paying $17 billion-to-$18 billion for the accounting firm's consulting unit.
Instinet files
Instinet Group LLC, a unit of Reuters Group PLC, filed for a $450 million IPO via lead underwriters Credit Suisse First Boston and Deutsche Banc Alex. Brown.
New York-based Instinet is an electronic trading network on which buyers and sellers can trade securities anonymously on 40 markets, including the New York Stock Exchange and Nasdaq.
Instinet has yet to detail how many shares it will sell or their price range. Reuters will continue to hold a majority stake but did not disclose in the SEC filing exactly how much it will hold in the company after the IPO.
Instinet plans to trade under the Nasdaq symbol "INET." 
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