Deloitte says acquisition will expand an already fast-growing practice

Executives with consulting giant Deloitte which completed its $350 million purchase of BearingPoint's government practice on May 8, said the acquisition will expand the company's already fast-growing federal practice.

Deloitte, which has averaged a 35 percent annual growth rate during the past five years, says BearingPoint will add significantly to its federal business, particularly in the areas of cybersecurity and systems designed to increase the transparency of financial markets in support of initiatives such as the Treasury Department's Troubled Asset Relief Program.

"As the government takes on new missions, it's going to have to add technology to take on those missions," Gene Procknow, managing director of federal government service at Deloitte, told Nextgov.

BearingPoint, which filed for Chapter 11 bankruptcy in February, announced in March that it would sell almost all its government operations to Deloitte. BearingPoint was 93rd on Government Executive's list of top federal contractors, with more than $516 million in revenue for fiscal 2007.

"We see this as an opportunity to combine Deloitte's fast-growing practice with BearingPoint's larger practice with more staying power and established client relationships," Procknow said.

Deloitte will gain 4,200 employees from the purchase, most of whom are expected to complete orientation by the end of this week.

The company worked with the White House on its 60-day review of cybersecurity practices and has made information security a top priority.

"We expect a wave of new regulatory controls," said Robin Lineberger, who led BearingPoint's federal government practice and holds the same position as Procknow at Deloitte. "Agencies are going to overseers and will require modifications and upgrades of systems in place today to provide them support or leverage in increasing regulatory oversight."

BearingPoint's ability to identify spending targets and win contracts in the government marketplace will be useful to Deloitte, he said. BearingPoint established government relationships in health care and energy, which are spending priorities for the Obama administration, Lineberger added.

Deloitte plans to leverage those relationships to expand its market share. "[Deloitte] has $600 million in health care annually and a full-fledged energy practice," he said. "That's synergy. The reach-back capability is phenomenal."

A government IT industry observer cautioned that it may take time for BearingPoint employees to adapt to Deloitte's culture. "Like any merger, they do have some cultural differences," said Ray Bjorklund, senior vice president and chief knowledge officer for FedSources, a consulting firm in McLean, Va. "Those things take a while to sort out. BearingPoint comes with contracts and lots of operational stuff going on. It's not like anybody is going to stop what they're doing to figure it all out. It will take a while for them to sort out the differences and be high performance."

Once the transition is made, however, he predicts the company will be a greater force in the federal market. "It makes them quite a powerhouse," Bjorklund said. "It certainly expands their customer footprint and competencies in practical and technology areas."