Make room for a man who’s got friends on Wall Street.
That appears to have been the driver behind Accenture’s decision to hire Harry You as its new CFO. The company’s CFO for the past four years, Mike McGrath, is being moved over to the less prominent post of treasurer.
The IT consulting firm, which was known as Andersen Consulting until the beginning of the year, is tentatively scheduled to go public on July 17, with You’s former employer, Morgan Stanley, as the co-lead underwriter.
You ran the information services group within the investment bank’s corporate finance department, where managing securities offerings was one of his responsibilities. He helped lead the syndicate for KPMG Consulting’s initial public offering in February, and he has also been working on the offering for PricewaterhouseCoopers Consulting, which is scheduled to go public either this year or next.
Publicly, Accenture is maintaining that You had not been involved with its deal. Still, the change in CFOs does raise some interesting questions. Foremost among them: Is the Accenture deal in trouble and was You hired to fix the problem?
Executives at Accenture and Morgan Stanley could not be reached for comment, and You was not available. But other people familiar with the job switch say You was brought on largely because he was the best candidate.
E. Peter McLean, a partner at the executive recruitment firm Spencer Stuart, which led Accenture’s CFO search says, “They were certainly looking for someone who was well connected to Wall Street, because no one at the company has been on the front lines with quarterly reports and public disclosure.” You’s investment-banking skills and his ability to market IPOs to investors were crucial factors in the decision-making process, McLean says.
“Harry really knows the capital markets and has for years been closely connected with professional services firms and their financial requirements,” McLean says. “He knows the sector well, is very familiar with the complications of taking private partnerships into a public setting, and knows the financial drivers that make professional services firms successful.”
He adds, “You has real credibility with the portion of Wall Street that covers professional services.”
Martin Ressinger, an analyst at Fitch Inc., says, “All of a sudden they are going to have a huge new constituency, which is public shareholders, and Accenture is not used to dealing with that.”
One of You’s primary strengths will be marketing, says Randall Roth, research analyst at Renaissance Capital, a Greenwich Conn., money manager that specializes in new stock offerings. It’s important for any public company to have a CFO who can articulate its financial results to investors, the press, and the board, and You fit the bill.
Still, Accenture’s decision to bring in a new CFO only a few weeks prior to its IPO comes at a time when the public markets have had little enthusiasm for the technology- consulting sector. For example, KPMG’s shares are trading below their initial offering price of $18 in February.
Renaissance Capital’s Roth, and Spencer Stuart’s McLean, say the timing of the transition is not a reflection of last minute, pre-IPO jitters, but merely a matter of circumstance.
“It is unusual to do it in this kind of time period,” says Roth. “But they could have either done it one month before the offering or afterwards, and neither of those options would have been optimal because they are both going to be subject to issues of misperception,” Roth adds.
It would not have been a good idea to bring in a new CFO shortly after the IPO, says Roth, particularly if the issue is weak.
“They want to be able to present a coherent picture of financial performance going into what is a very critical quarter for a company coming off an IPO,” he comments. The other option would have been to wait a few quarters after the IPO to change the guard.
“But they might not then have the skills they need in place, and that could set back their leadership-development plans,” Roth says. “This is probably not the optimal time, but it’s probably the best they can do.”
Spencer Stuart’s McLean, for his part, claims the timing of the shift was purely a function of the dynamics of the search process itself.
“They were committed to do it earlier, but the availability of the right talent did not occur until the early part of May,” he says. “It then took us some time to get the candidate through the interview process and negotiate an offer.”
McLean says You’s selection was based solely on his qualifications, and that his association with Morgan Stanley was “very, very coincidental. Harry had no connections at all with the Accenture transaction.”
McLean adds, “There were certainly other attractive candidates they could have selected, but they did not have the professional services knowledge and experience that Harry brought. That was the key.”
But what drove You to leave a highly lucrative job at Morgan Stanley to work for a company only a few weeks away from judgment day? McLean says You was motivated by the potentially huge paybacks associated with the risk he is taking.
“Harry really believes in the economic value that can be created at Accenture, and is betting that the equity position that he was offered has significant future value,” the headhunter says. “And as part of the senior management team, he believes he can help influence that value creation.”
But it remains to be seen whether the gamble will pay off for You and Accenture.
“It’s not real clear how the market will respond,” says Fitch’s Ressinger. “But this is a great company with a great reputation.”