BearingPoint acquisition has extended Deloitte's reach

By Marjorie Censer
Monday, June 28, 2010

With a full year of work under its belt, the new Deloitte federal practice -- which now includes the former BearingPoint public sector business -- is able to reach more government organizations with more services and is hiring at a fast pace, according to a company official.

The company posted about $1.65 billion in federal revenue this year -- up from combined revenue of about $1.43 billion before the acquisition. Deloitte bought the vast majority of BearingPoint's federal practice after BearingPoint filed for bankruptcy in early 2009.

Integrating the two businesses brought challenges. One of the most problematic parts was expanding the back-office parts of the business to match the scale of the company, said Robin Lineberger, who previously oversaw BearingPoint's public service practice and now heads Deloitte's federal government services business. For instance, the company nearly doubled its recruiters to meet its hiring demands.

Additionally, the teams of employees that work on contracts still aren't fully meshed, he said.

The legal process of bringing together the two companies isn't over. John DeGroote, whose firm serves as trustee to BearingPoint's liquidating trust, confirmed his company is now trying to reclaim BearingPoint expenses that were improperly reimbursed -- either because the expense should not have been reimbursed or because the employee did not provide the right documentation.

The trust has sent out between 400 and 500 letters to former BearingPoint employees seeking $750,000 in expenses, $250,000 of which has already been returned, DeGroote said.

But physically, the two companies are now one. The new Deloitte federal business has 5 1/2 floors in the Corporate Executive Board's Rosslyn facility and has vacated BearingPoint's former headquarters in McLean. Lineberger said Deloitte still uses its former headquarters on G Street, and the company's commercial business has an office building in McLean.

This past year, Deloitte hired close to 1,400 people, and the firm is now planning to add 160 to 170 more per month. In particular, Deloitte is ramping up its cyber and health-care work, Lineberger said.

He credited the acquisition with dramatically increasing the kinds of work the company can do for a much larger group of customers. Deloitte had a more expansive set of services and products than BearingPoint -- including tax, audit and consulting services -- but BearingPoint, with more than 35 years in the federal business, had access to a larger set of clients, Lineberger said.

For example, the company is now helping the federal government identify state taxes it may have inadvertently paid through contracted work and figure out how to prevent those costs from being incurred. BearingPoint, Lineberger said, could not have done that job because it simply didn't do tax work.

Kelly Matthews, who conducts public sector research for Peterborough, N.H.-based Kennedy Consulting, Research and Advisory, said Deloitte's federal business -- like that of other consulting firms -- has served as a bright spot in a tough economy.

Calling the BearingPoint purchase a smart buy, Matthews said the acquisition has enabled Deloitte to grow dramatically.

"This obviously propelled them to a whole other level," she said.

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