When do the legendary game of golf and great Big Four firms meet on equal ground?
This intersection happens when two of the top players in the world are sponsored by two of the Big Four firms. Add to that background some competitive drama, and you have the makings of a golf thriller.
Tiger Woods recently reported that he will be returning to golf championship play by taking part at the Accenture Match Play 2009 next week, and that caps more than 250 days of Tiger-less and insipid golf watching. Tiger Woods is heavily sponsored by Accenture and features prominently on their website, hoardings and commercials. Accenture’s “High Performance” services are exemplified by Tiger’s relentless pursuit of perfection.
On the other hand, Phil Mickelson, the crowd pleasing leftie has had a choppy record over the last two years, winning brilliantly at some championships and barely making the leaderboard at others. But this week, he has been playing at fabulous levels at the Northern Trust Open, currently at 15 under par and leading on the board on the 10th hole of the last round. Phil Mickelson also proudly sports his black KPMG cap with the distinctive logo, having signed a three year contract with KPMG in February of 2008.
Tiger Woods and Phil Mickelson have very different approaches to the game and to the championships. Tiger’s militaristic attack on the golf course compares with Phil’s strategic play on the course.
All eyes will now be on the Tiger-Phil play off, if that ever happens, on the Accenture Match Play next week, and that is sure to be a nail biting, crowd pulling event.
Be sure to be watching next Saturday and Sunday when two of golf’s best players sponsored by two Big Four firms (right on their caps!) provide excitements and moments that will be remembered for a long time.
Sunday, February 22, 2009
Wednesday, February 18, 2009
BearingPoint Files for Chapter 11 Bankruptcy Today
Today, BearingPoint, Inc. announced “it has achieved a financial restructuring agreement with its senior secured lenders that will significantly reduce its debt and improve its capital structure.”
In other words, the firm is bankrupt.
And it has file for voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of New York only for the US operations though
BearingPoint says this filing was made with a “pre-arranged” restructuring plan with senior secured lenders, and will likely move this as fast as possible. Clearly, the firm examined all its available options and chose to pursue this alternative, indicating that all and any efforts to find a buyer were not fruitful.
In essence, the firm and its senior secured lenders agree to the proposed pre-arranged plan of reorganization with these key constituents:
(1) replace the $500 million senior secured credit facility with a new secured, senior credit facility: $272 million term loan plus accrued interest. $130 million synthetic letter of credit facility and issuance of new preferred stock
(2) unsecured debt will be exchanged for different classes of common stock
(3) all existing equity in the Company will be cancelled for no consideration.
How does this impact BearingPoint?
First, most of the debt is gone. And so does the burden of paying principal and interest, and buying back debentures some of which were coming due in just weeks. And the obligation to purchase all debt when the company’s stock is delisted from the NYSE is gone too.
Day-to-day operations are expected to continue as “normal”, as much as normal is under these circumstances, and clients evaluate their projects and contracts with a bankrupt vendor.
There is going to be an immediate impact on BearingPoint’s employees. Not that this was unexpected, since everyone could see the stock price dip each day to new lows. But the firm’s employees may now take a deeper look at their situation and evaluate their options.
We have been saying all along that some kind of end-game needs to happen at this time, either a buyout or a sale, with bankruptcy being the silent but necessary point of last resort.
Andersen folded when the Department of Justice made a criminal case against the firm (eventually overturned) but it was a viable financial entity at that point.
The fall of BearingPoint was driven by mismanagement both of the financials and of the firm. A company with over $3 billion in sales should not have a market capitalization of less than $2 million, it doesn’t make sense.
We mourn the loss of a Big Four firm, and trust that BearingPoint can find a viable avenue to return to strong operating performance.
In other words, the firm is bankrupt.
And it has file for voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of New York only for the US operations though
BearingPoint says this filing was made with a “pre-arranged” restructuring plan with senior secured lenders, and will likely move this as fast as possible. Clearly, the firm examined all its available options and chose to pursue this alternative, indicating that all and any efforts to find a buyer were not fruitful.
In essence, the firm and its senior secured lenders agree to the proposed pre-arranged plan of reorganization with these key constituents:
(1) replace the $500 million senior secured credit facility with a new secured, senior credit facility: $272 million term loan plus accrued interest. $130 million synthetic letter of credit facility and issuance of new preferred stock
(2) unsecured debt will be exchanged for different classes of common stock
(3) all existing equity in the Company will be cancelled for no consideration.
How does this impact BearingPoint?
First, most of the debt is gone. And so does the burden of paying principal and interest, and buying back debentures some of which were coming due in just weeks. And the obligation to purchase all debt when the company’s stock is delisted from the NYSE is gone too.
Day-to-day operations are expected to continue as “normal”, as much as normal is under these circumstances, and clients evaluate their projects and contracts with a bankrupt vendor.
There is going to be an immediate impact on BearingPoint’s employees. Not that this was unexpected, since everyone could see the stock price dip each day to new lows. But the firm’s employees may now take a deeper look at their situation and evaluate their options.
We have been saying all along that some kind of end-game needs to happen at this time, either a buyout or a sale, with bankruptcy being the silent but necessary point of last resort.
Andersen folded when the Department of Justice made a criminal case against the firm (eventually overturned) but it was a viable financial entity at that point.
The fall of BearingPoint was driven by mismanagement both of the financials and of the firm. A company with over $3 billion in sales should not have a market capitalization of less than $2 million, it doesn’t make sense.
We mourn the loss of a Big Four firm, and trust that BearingPoint can find a viable avenue to return to strong operating performance.
Monday, February 09, 2009
PwC CEO Confidence Survey Shows All-Time Low Confidence
PricewaterhouseCoopers’s recently published 12th annual CEO survey tells us nearly what every other survey indicates. Echoing the pessimism which Deloitte found in January 2009 in global CFOs, this shows that CEO confidence is at an all-time low. Globally, only 21% of CEOs seem to be very confident on any revenue growth at all in the next 12 months. This is spectacularly down from a reading of 50% in last year's Global Annual Survey.
This pessimism is not isolated to one area, it seeps across all geographies, business sectors and levels of economic development. 7 of 10 CEOs indicate their companies will be affected by the credit crisis, and of this bunch, 80% will face higher financing costs, and 70% will postpone capex. The banking, utilities, construction, entertainment and automotive sectors are to be affected the most.
On the positive side, only 15% of North America and 15% Western Europe CEOs are even somewhat confident of the future. The picture is slightly better in emerging economies: 21% in Central and Eastern Europe, 31% in Asia Pacific, and 21% in Latin America remain optimistic. Most see only a rough slow road ahead.
What do CEOs want most at this time?
They want leadership and consistency from government, clear action, consistent policies and convergence of global tax and regulatory frameworks. But they are afraid of regulatory overreach, which could impede growth. CEO are more optimistic of cross-border JVs rather than M&A to drive sustainable growth. Energy costs and staff talent remain long-term challenges, with 80% CEOs reducing energy costs through efficiencies and alternative sources of energy; and 70% bemoaning shortage of qualified candidates.
Finally, better information is needed immediately to manage increasing and complex global risks.
CEOs are by nature optimists and continuous sellers of a bright future, so this level of pessimism does reflect a very tough global environment. There is some level of sobriety that has crept in due to the sudden, unanticipated and broad impact of the global credit crisis and ensuing recession in every part of the globe.
Big4 firm surveys of key business leaders, CEOs and CFOs are important since they cover a large section of global industry, and such surveys may prove to be key sentiment indicators on how long our tough environment will last, or things will change for the better in key decision makers.
This pessimism is not isolated to one area, it seeps across all geographies, business sectors and levels of economic development. 7 of 10 CEOs indicate their companies will be affected by the credit crisis, and of this bunch, 80% will face higher financing costs, and 70% will postpone capex. The banking, utilities, construction, entertainment and automotive sectors are to be affected the most.
On the positive side, only 15% of North America and 15% Western Europe CEOs are even somewhat confident of the future. The picture is slightly better in emerging economies: 21% in Central and Eastern Europe, 31% in Asia Pacific, and 21% in Latin America remain optimistic. Most see only a rough slow road ahead.
What do CEOs want most at this time?
They want leadership and consistency from government, clear action, consistent policies and convergence of global tax and regulatory frameworks. But they are afraid of regulatory overreach, which could impede growth. CEO are more optimistic of cross-border JVs rather than M&A to drive sustainable growth. Energy costs and staff talent remain long-term challenges, with 80% CEOs reducing energy costs through efficiencies and alternative sources of energy; and 70% bemoaning shortage of qualified candidates.
Finally, better information is needed immediately to manage increasing and complex global risks.
CEOs are by nature optimists and continuous sellers of a bright future, so this level of pessimism does reflect a very tough global environment. There is some level of sobriety that has crept in due to the sudden, unanticipated and broad impact of the global credit crisis and ensuing recession in every part of the globe.
Big4 firm surveys of key business leaders, CEOs and CFOs are important since they cover a large section of global industry, and such surveys may prove to be key sentiment indicators on how long our tough environment will last, or things will change for the better in key decision makers.
Saturday, February 07, 2009
KPMG's Novel Experiment for 4 Day Work Week Appears Closer to Fruition
Last month KPMG UK introduced a scheme where all of KPMG UK's 11,000 employees could as a group take a voluntary pay cut through either a 4 day work week or a sabbatical in order to avoid any job cuts for employees selectively affected by the global economic crisis.
The firm wanted a threshold of 75% to employees to sign up for the scheme to work.
All partners had signed up before it was offered to employees.
Halfway through the enrollment period, KPMG sweetened the offer - only a 10% reduction in pay if 75% signed up.
UK press reports that 69% had signed up as of Friday, February 6th, so the sweetening appeared to work.
This is good news for all parties in that each of their theoertical economic needs are satisfied.
We will see how this scheme does really work in terms of impact on people, schedules, client and morale within KPMG UK, and whether other Big Four firms will consider such an arrangement for their employees in these tough times.
Philosophically though, there is some kind of very interesting game theory at work at a microeconomic level. The firm will not go forward with the scheme until 75% of employees sign up since it is uneconomical at percentages less than this threshold.
For each individual employee, the choice is somewhat of a dilemma - should I accept this offer and take a known 10% cut in pay? or should I reject and take a chance that I may be laid off with unknown probability? What if I sign up but as a group we don't reach the 75% threshold level? What part of this decision is altruistic in that it helps my colleagues, and what part is selfish in that I am protecting my economic interest?
We can only conjecture. If there are KPMG UK employees reading this blog, we welcome your honest thoughts.
The firm wanted a threshold of 75% to employees to sign up for the scheme to work.
All partners had signed up before it was offered to employees.
Halfway through the enrollment period, KPMG sweetened the offer - only a 10% reduction in pay if 75% signed up.
UK press reports that 69% had signed up as of Friday, February 6th, so the sweetening appeared to work.
This is good news for all parties in that each of their theoertical economic needs are satisfied.
We will see how this scheme does really work in terms of impact on people, schedules, client and morale within KPMG UK, and whether other Big Four firms will consider such an arrangement for their employees in these tough times.
Philosophically though, there is some kind of very interesting game theory at work at a microeconomic level. The firm will not go forward with the scheme until 75% of employees sign up since it is uneconomical at percentages less than this threshold.
For each individual employee, the choice is somewhat of a dilemma - should I accept this offer and take a known 10% cut in pay? or should I reject and take a chance that I may be laid off with unknown probability? What if I sign up but as a group we don't reach the 75% threshold level? What part of this decision is altruistic in that it helps my colleagues, and what part is selfish in that I am protecting my economic interest?
We can only conjecture. If there are KPMG UK employees reading this blog, we welcome your honest thoughts.
Monday, February 02, 2009
PricewaterhouseCoopers Celebrates 75 years "Diamond Anniversary" Counting Oscars® Ballots
The upcoming 81st Annual Academy Awards, popularly known as the Oscars will be held in Los Angeles on Sunday, February 22, 2009.
And this year marks an important landmark for a Big Four firm.
PricewaterhouseCoopers LLP has been counting Oscars® ballots for the Academy of Motion Picture Arts and Sciences for an amazing 75 years. During all these years, the painstaking audit process has remained exactly the same and there has never been a security breach. The audit leaders, Oltmanns and Rosas, lead a group of accountants who work on the project from a top-secret location.
“This year is particularly special for PricewaterhouseCoopers as we celebrate our 75th anniversary counting the Oscars ballots on behalf of the Academy,” said Brad Oltmanns. “PricewaterhouseCoopers’ involvement with the Academy is extremely high-profile and represents an ongoing source of pride for the Firm.”
“Even with the technology advancements of the past 75 years, PricewaterhouseCoopers has never changed its process of hand tabulating the ballots to ensure the highest level of precision, discretion and secrecy,” said Rick Rosas.
This is how it works (from the PwC website)
Nomination ballots were mailed to 5,810 voting members on December 26, 2008, with votes due by January 12, 2009. Nine days later, on January 21, the PricewaterhouseCoopers ballot team delivered nominations results to the Academy in preparation for the announcement on January 22. Final ballots will be mailed today (January 28, 2009); final ballots are due by February 17.
All completed ballots are delivered to PricewaterhouseCoopers. The balloting leaders then manually tabulate the responses according to Academy rules. As a precautionary measure, two complete sets of envelopes bearing recipients’ names are prepared and brought by PricewaterhouseCoopers partners to the ceremony via separate, secret routes. As a second precautionary measure, the PricewaterhouseCoopers balloting leaders also memorize the names of the award winners.
Identities of Oscar recipients are kept confidential until they are announced during the live telecast. During the telecast, Oltmanns and Rosas will remain backstage and hand the envelopes to award presenters immediately before they walk onstage.
And here are some fun facts:
440,000+: The approximate number of ballots counted by PricewaterhouseCoopers in 75 years on the job.
2,500+: The number of winners' envelopes stuffed since the envelope system was introduced in 1941.
1,700: The approximate number of “person-hours” it takes the PricewaterhouseCoopers team every year to count and verify the ballots by hand.
34: The number of broadcasts PricewaterhouseCoopers’ partners have appeared on since 1953 – the year the Oscars were first televised.
24: The number of awards categories to be tabulated for the 81st Academy Awards at a secret location known only to the members of the small PricewaterhouseCoopers ballot team.
7: The number of days it takes to count the ballots for nominations.
3: The number of days it takes to count the final ballots.
This is as glamorous as auditing gets – high-profile client, high levels of anticipation, senior team in a top-secret location, no margin for error, billions of viewers and hobnobbing with Hollywood celebrities. Kudos for PwC for keeping this up!
And this year marks an important landmark for a Big Four firm.
PricewaterhouseCoopers LLP has been counting Oscars® ballots for the Academy of Motion Picture Arts and Sciences for an amazing 75 years. During all these years, the painstaking audit process has remained exactly the same and there has never been a security breach. The audit leaders, Oltmanns and Rosas, lead a group of accountants who work on the project from a top-secret location.
“This year is particularly special for PricewaterhouseCoopers as we celebrate our 75th anniversary counting the Oscars ballots on behalf of the Academy,” said Brad Oltmanns. “PricewaterhouseCoopers’ involvement with the Academy is extremely high-profile and represents an ongoing source of pride for the Firm.”
“Even with the technology advancements of the past 75 years, PricewaterhouseCoopers has never changed its process of hand tabulating the ballots to ensure the highest level of precision, discretion and secrecy,” said Rick Rosas.
This is how it works (from the PwC website)
Nomination ballots were mailed to 5,810 voting members on December 26, 2008, with votes due by January 12, 2009. Nine days later, on January 21, the PricewaterhouseCoopers ballot team delivered nominations results to the Academy in preparation for the announcement on January 22. Final ballots will be mailed today (January 28, 2009); final ballots are due by February 17.
All completed ballots are delivered to PricewaterhouseCoopers. The balloting leaders then manually tabulate the responses according to Academy rules. As a precautionary measure, two complete sets of envelopes bearing recipients’ names are prepared and brought by PricewaterhouseCoopers partners to the ceremony via separate, secret routes. As a second precautionary measure, the PricewaterhouseCoopers balloting leaders also memorize the names of the award winners.
Identities of Oscar recipients are kept confidential until they are announced during the live telecast. During the telecast, Oltmanns and Rosas will remain backstage and hand the envelopes to award presenters immediately before they walk onstage.
And here are some fun facts:
440,000+: The approximate number of ballots counted by PricewaterhouseCoopers in 75 years on the job.
2,500+: The number of winners' envelopes stuffed since the envelope system was introduced in 1941.
1,700: The approximate number of “person-hours” it takes the PricewaterhouseCoopers team every year to count and verify the ballots by hand.
34: The number of broadcasts PricewaterhouseCoopers’ partners have appeared on since 1953 – the year the Oscars were first televised.
24: The number of awards categories to be tabulated for the 81st Academy Awards at a secret location known only to the members of the small PricewaterhouseCoopers ballot team.
7: The number of days it takes to count the ballots for nominations.
3: The number of days it takes to count the final ballots.
This is as glamorous as auditing gets – high-profile client, high levels of anticipation, senior team in a top-secret location, no margin for error, billions of viewers and hobnobbing with Hollywood celebrities. Kudos for PwC for keeping this up!
Sunday, February 01, 2009
Accenture Stock Holding Up, Tremendous Operating Performance
Accenture (NYSE:ACN) stock has performed extraordinary well over this credit crisis and against the sinking global stockmarket. In 2008, the Accenture stock fell only 7.6%, 30% better than its industry and 31% better than the S&P500 index. At the current price of $31.56, the stock has been fairly flat compared to its level in January 2008. In the same period, the S&P500 has dropped by around 40% and continued its fall in January 2009 by another 9%.
Accenture’s resilient stock performance is underpinned by strong operating results. The company’s sales have remained amazingly flat and earnings have been equally holding up. November 2008 EPS of 74 cents had an earnings surprise of 9% against an estimate of 68 cents. Imagine that, a positive earnings surprise! The 74 cents EPS was 23% higher than the 60 cent EPS earned in November 2007. Again, quite unbelievable, in a world where recession is rampant, the Accenture machine continues to crank out both top line and bottom line performance.
Both of Accenture’s two key businesses – Consulting and Outsourcing are both firing on all cylinders. Sales and booking momentum are up and Accenture’s fabled management and unrelenting competitive performance focus is yielding top notch returns.
We love this company and love the stock, and it belongs to any intelligent portfolio and this performance in this time is positive proof.
Accenture’s resilient stock performance is underpinned by strong operating results. The company’s sales have remained amazingly flat and earnings have been equally holding up. November 2008 EPS of 74 cents had an earnings surprise of 9% against an estimate of 68 cents. Imagine that, a positive earnings surprise! The 74 cents EPS was 23% higher than the 60 cent EPS earned in November 2007. Again, quite unbelievable, in a world where recession is rampant, the Accenture machine continues to crank out both top line and bottom line performance.
Both of Accenture’s two key businesses – Consulting and Outsourcing are both firing on all cylinders. Sales and booking momentum are up and Accenture’s fabled management and unrelenting competitive performance focus is yielding top notch returns.
We love this company and love the stock, and it belongs to any intelligent portfolio and this performance in this time is positive proof.
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