Ernst & Young has agreed terms for the sale of its consultancy arm to Paris-based Cap Gemini in a £7bn deal thought to be the largest in the consultancy sector's history.
Accountancy Age, 29 Feb 2000
In a statement, management consulting and IT group Cap Gemini said it would acquire almost all of the Ernst & Young Consulting business, with headcount of approximately 18,000 and 1999 revenues of around 3.5bn euros, for a maximum of 43.5m shares and 375m euros.
The transaction is thought to be the biggest in the consultancy sector's history and will leave around 36% of the combined group, which will be worth around £7bn, in the hands of E&Y partners.
News that the the two were in talks first emerged in December, and the announcement of a final agreement comes less than a fortnight after large Big Five rival PricewaterhouseCoopers announced it was splitting some of its consultancy services into one or more separate businesses.
The firms' actions are driven by pressure from regulators concerned about audit independence, the desire of their consultancy wings to seek fresh sources of capital and the rise of e-business.
The completion of the Cap Gemini deal is now subject to the vote of Ernst & Young partners.
These votes will take place in the next few weeks on a country by country basis, and the results announced in April.
Cap Gemini shareholders will then discuss and approve the terms and conditions of the transaction at an Extraordinary Meeting to take place by the end of June 2000.
According to Cap Gemini, the terms and conditions of the transaction are as follows: the initial agreement covers Ernst & Young Consulting businesses in the following major countries: USA, Canada, United Kingdom, Germany, France, Spain and Italy; over the next few weeks, other countries are expected to join this agreement, including in particular Sweden, Norway, Finland, Denmark, The Netherlands, Belgium, Australia, New Zealand.
If all Ernst & Young Consulting entities participate in the transaction, Cap Gemini will issue a maximum of 43.5 million new shares and pay 375 million euros.
Subject to market conditions, up to a maximum of 50% of the Cap Gemini newly issued shares will be sold by 1st April 2001.
The remaining shares will be subject to retention and forfeiture agreements over 5 years and any disposals based on an orderly marketing agreement.
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