Intellectual capital to bind KPMG

KPMG’s consultancy arm will be irrevocably bound into the rest of the partnership after the firm sets up a central body to house the firm’s global intellectual capital. The knowledge centre is known by the working title of KPMG Intellectual Capital and will own all KPMG names, trademarks, processes, databases and methodologies. KPMG is currently in talks with bankers about raising a $200m bond to finance IT restructuring plans.

“We will be doing two things: redesigning the structure of KPMG and creating a body of common economic interest, which will be executed from the centre,” said Colin Sharman, international chairman at KPMG.

Under the restructuring plans, six CEOs will be appointed, each responsible for an international practice. “We will be raising some capital to try to accelerate the restructuring and a lot of that money will be used to finance new information systems. We will have an intellectual capital body that will have a golden share in all our methodologies,” said Sharman.

The new proposals will have the effect of preventing an Andersen Consulting vs Arthur Andersen style split. “Management consultancy has been set to remain on an integrated basis,” Sharman said. The proposals for the centre are being put forward to KPMG’s executive committee this month.

Sharman admitted that the abandoned merger with Ernst & Young would have helped the firm’s technology systems, but he denied that KPMG was now copying Ernst & Young’s global consultancy structure.

“You could surmise that we are taking the route that we were talking about with Ernst & Young. The merger talks have been a very good consultancy exercise: we learnt some of the things we don’t do so well and how we should refine things,” he said.

“We are absolutely confident that we can overtake Deloitte & Touche to number three position.” Sharman also believes that, if Arthur Andersen and Andersen Consulting split, KPMG will be in a position to beat the accountancy firm in the US and expand its consultancy arm.

“If Arthur Andersen separates from Andersen Consulting, it is not clear that the former will be bigger than us in the US. Second position will be up for grabs,” he said Sharman.

KPMG said that, after first quarter growth in UK management consultancy revenues of 45 per cent to #37.3m, it expects 50 per cent growth over the next year. In the UK, fees grew by 36 per cent to #153.2m at the end of 1997.