BearingPoint Nears End of Difficult Run
Saturday, July 25, 2009
BearingPoint may be nearing the end of its life as an independent company after agreeing on July 17 to sell off its last big business, but it hasn't exactly disappeared.
The McLean consultancy's largest and most successful practice -- providing information technology consulting services to federal government agencies -- has continued to push ahead, landing millions of dollars in contracts for its new owner, the global consulting firm Deloitte.
Although it is now Deloitte, the "BearingPoint" name remains displayed on what had been the company's global headquarters off International Drive, across from Tysons Galleria mall. Many BearingPoint workers temporarily work there, reporting to the same desks to serve the same federal contracts.
While much has remained consistent, there have been rocky spots in the transition. At least a half dozen companies have snapped up parts of BearingPoint, leaving employees to deal with the demands of new organizations while trying to preserve a bit of what they left behind.
Most nagging had been a clash in federal bankruptcy court over millions of dollars worth of unused vacation time, or paid time off. Creditors disputed the company's request to honor employees' accrued vacation time, expressing concern that they would be shortchanged if employees were paid. But former BearingPoint employees seem to have scored a victory. According to BearingPoint spokeswoman Elizabeth Palmer, a bankruptcy court judge ruled on Thursday that the company can spend $4 million a month to reimburse people for their paid time off. Palmer said the company expects to have employees fully compensated by year's end.
A May 6 presentation put costs of BearingPoint's paid-time-off program at $52.9 million and severance at $41.4 million, according to creditors' May 12 filing with the U.S. Bankruptcy Court in Manhattan. What the company owes now is less, Palmer said, because those who have acquired BearingPoint's businesses assumed the obligations to pay the vacation time.
Spun off from KPMG in 2001, BearingPoint filed for bankruptcy Feb. 18, foundering under a heavy debt load. The company began dismantling itself in March, selling off its businesses one by one. It has nearly completed the process. BearingPoint agreed on July 17 to sell of its remaining major business unit -- a combination of its practices in Europe, the Middle East and Africa. Only small practices in the United States and in countries such as Australia and Korea remain. BearingPoint laid off about 40 employees last month in McLean.
The company's government business, its largest and most successful practice accounting for more than 40 percent of revenue, was sold for $350 million in May to Deloitte, which has assumed BearingPoint's lease in Tysons Corner. The company has leased space in Rosslyn and plans to move the former BearingPoint employees in with its own in November.
In the deal, Deloitte gained a "significant portion" of a $1.4 billion business, and has benefited from some recent federal contract wins. The former BearingPoint unit registered about $217 million in federal contracts after the February bankruptcy filing. Deloitte has booked $210 million since the acquisition, according to a spokesman.
"They were a very solid company, and from what I can tell have been pretty fully absorbed into Deloitte. A lot of their senior people are still there," said Stan Z. Soloway, president of the Professional Services Council, a trade group for government contractors.
Gene Procknow, who is co-managing Deloitte's $1.5 billion federal services unit, said BearingPoint's government business was coveted for its ability to win federal contracts, particularly in a time of considerable government expansion.
"There was a lot of interest in BearingPoint's public services group," Procknow said. "If you look at consulting markets around the country and around the world, many of them are contracting. The federal market is expanding . . . and is likely to be on a long-term expansion path."