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A.T. Kearney, managers resume talks

Monitor walks away from talks to buy Chicago consultant from EDS

By Shruti Date Singh

The Monitor Group broke off talks to acquire A.T. Kearney from Electronic Data Systems Corp. Monday and Texas-based EDS has resumed buyout negotiations with managers of the Chicago-based consulting firm.
“A.T. Kearney and EDS are once again discussing a management buyout,” said a person familiar with the situation.

The possibility of selling to management was raised earlier this year before EDS began talks in June with Monitor, a Massachusetts-based consulting firm with about $300 million in revenue. It’s not clear why the talks failed to an agreement.
“We told them we were going to stand down. We would not be making an offer,” a Monitor Group source said. “We could not structure an equation that would make everyone happy.”

In February, EDS disclosed its desire to sell the 80-plus year-old management consulting firm as part of a plan to focus on its core information technology outsourcing business. EDS bought A.T. Kearney 10 years ago for about $600 million.

A.T. Kearney’s revenues grew from $500 million in 1995 to almost $1.3 billion in 2000. But revenues have slid since 2001 to $806 million in 2004, a decline some have blamed on EDS’s emphasis on cross-selling information technology offerings over A.T. Kearney’s management advisory services.

The recent downturn in A.T. Kearney’s fortunes has affected its attractiveness as an acquisition target. Some observers have pegged its value at between $300 million and $400 million.

After disclosing its intention to sell A.T. Kearney, EDS said it was exploring the possibility of a management buyout of the unit. In June, EDS indicated it was in talks with a “third party” acquirer, but never confirmed news reports Monitor was the suitor.

With Monday’s development, it appears a management buyout is back on the table. An EDS spokesman wouldn’t confirm that, but said: “I can’t comment on whether we are in negotiations with a third party or not. We are looking at what’s in the best interest of A.T. Kearney and its officers, its employees and its clients. We are pursuing a variety of options.”

In another sign the situation has changed, the EDS spokesman said the company has extended its timetable for selling A.T. Kearney to the end of the year from the end of the third quarter.

A.T. Kearney favors an ownership change of some kind, a spokesman for the subsidiary said.

“We’ve said that a change in A.T. Kearney ownership is in the best interest of both EDS and A.T. Kearney’s clients, officers and employees and we are pursuing a number of options to achieve that goal,” the spokesman said.

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