On Wednesday, a court hearing in New York considered a $25m bid from PricewaterhouseCoopers (PwC) for the North American commercial services wing of failed consultancy BearingPoint (formerly KPMG Consulting). John Stokdyk reports on the implications surrounding the Big Four firm's return to the consultancy marketplace.

A series of mishaps, blunders and adverse market conditions forced BearingPoint (formerly KPMG Consulting) to seek Chapter 11 bankruptcy protection in February. The firm reached an agreement to sell its North American Public Services unit to to Deloitte for $350m, while PwC also put in a bid to acquire BearingPoint's Japanese practice. Negotiations are underway to dispose of other parts of the business, in Europe/Mid-East and Latin America.

As previously reported [1], the accountancy commentator and former Big Four employee Francine McKenna has taken a close interest in PwC's consultancy activities on her Re:The Auditors [2] website. Along with Ernst & Young and KPMG, PwC pulled out of consultancy in 2002 following a spate of independence and ethics scandals culminating in the Enron and WorldCom corporate collapses and the introduction of the Sarbanes-Oxley Act. PwC sold its consultancy wing to IBM for $3.5bn and signed a five-year non-compete agreement as part of the deal.

Quoting from a 2008 report compiled by market analyst Gartner, McKenna suggested that PwC wanted to get back into consultancy as early as 2005, and partnered with its former audit client, the scandal-ridden Indian consultancy Satyam, on several implementation projects.

At a 2008 PwC "analyst day" meeting, the firm's US advisory strategy leader Joe Duffy is quoted by Gartner as saying, "We are full scale in the implementation and integration business." With the BearingPoint acquisitions, PwC will be able to beef up this claim with the addition of around 1,500 consultancy professionals bringing Oracle and SAP expertise in important markets such as financial services, utilities, and pharmaceuticals.

In a detailed post [3] running to 3,000 words, McKenna examined PwC's consultancy strategy leading up to the BearingPoint bid and questioned the implications surrounding several of its audit engagements. When she raised the issues with the Public Company Accounting Oversight Board (PCOAB), they responded that Sarbanes-Oxley law gives them the authority to stop acquisitions that are not in the public interest - but it does not give regulators the power to stop acquisitions by audit firms. (Edited in response to clarification posted below - Ed.)

In a supporting AccMan post, Dennis Howlett urged readers seeking to identify the firm's commercial motives for this new direction to adopt the forensic accountant's credo, follow the money [4].

Completion of PwC's BearingPoint bids cannot take place without the US district court's approval.