KPMG LLP, announced this week that it has entered a definitive agreement to sell its Dispute Advisory Services (DAS) unit to FTI Consulting, Inc., a multi-disciplined consulting organization, for approximately $89.1 million. The transaction is expected to close during the fourth quarter of 2003.
"This proposed transaction will help KPMG meet marketplace needs in the new regulatory climate by expanding the services that offer the greatest growth opportunity for a large accounting firm's Forensic practice - our Investigative and Integrity Advisory Services (IIAS), and Forensic Technology Services (FTS) units," said Richard Girgenti, national partner in charge of KPMG's Forensic practice. "We're channeling resources to build an exceptional Forensic practice and provide the services that reflect client needs. Among our priorities is further integrating our Forensic capabilities in the audit practice."
The transaction will include approximately 26 KPMG partners, 125 other billable professionals plus support staff, who will join FTI. The transaction does not affect any other KPMG operations. More than 300 professionals remain in KPMG's Investigative and Integrity Advisory Services (IIAS), and Forensic Technology Services (FTS) units.
Girgenti explained that the marketplace has changed, with the Sarbanes-Oxley Act prohibiting accounting firms from performing expert-witness work for their audit clients in the United States, and that many corporate decision-makers are hiring expert witness services from other sources to avoid any appearance of conflict. "Certainly reform has impacted growth in this service area, and it makes sense for us to key on those services that have the greatest opportunity for growth over the long term. We believe this decision further underscores KPMG's leadership role in helping to restore credibility to the accounting profession," Girgenti said.
"In addition, while we weren't required to separate the DAS practice, the transaction reflects our deliberate decision to lead reform. Despite the fact that providing DAS is permissible to non-audit clients - in the spirit of Sarbanes-Oxley, we actively sought and found a buyer - making us the first among the Big Four audit firms in the United States to divest its Dispute Advisory Services unit," he said.
Girgenti noted that the proposed transaction does not affect the DAS practices of KPMG member firms in other countries, where, because of differing regulations, the individual member firms will continue to serve their clients.
"We're intent on growing our Forensic services in the United States where we have market permission and where we will assist clients in their efforts to detect, prevent and investigate fraud and misconduct. KPMG will continue to provide and invest in a range of Forensic services through its IIAS and in its FTS practices," Girgenti said.
In line with KPMG's move to further integrate Forensic capabilities in its audit practice, during the past year, all audit partners and professionals have received forensic training, and select Forensic partners have been trained in the firm's audit methodology. In addition, KPMG has piloted a program that assigns a Forensic team to selected audit engagements. KPMG continues to reinforce the ties between its Forensic and Audit practices as it seeks new and better ways to meet the evolving needs of the marketplace.