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" By How does a panic end? The word black has been used to describe any dark day for the stock market, but the one that birthed the term happened on Black Friday, September 24, 1869. In a nepotism scandal strikingly similar to something Hugh Rodham might dream up, fanancier Jay Gould and railroad tycoon James &amp;quot;Jubilee Jim&amp;quot; Fisk enlisted President Grant&amp;#039;s brother-in-law to trick the prez into paying the going rate for gold after they&amp;#039;d amassed gigantic stores of it. They let it be known around Wall Street that Grant was in their corner--meaning he wouldn&amp;#039;t open up the reserves and food the market--and the precious metal predictably soared from $144 to $164 in a matter of hours. Demand grew so strong that militias were dispatched to put down the violence that was taking place at banks as depositors demanded their gold, threatening to hang bankers who wouldn&amp;#039;t cough it up. When the president realized he&amp;#039;d been duped, he ordered his Treasury secretary to announce that gold from the reserves had been made available for trading. Even though the government didn&amp;#039;t have the $4 million it said it did (the secretary later said he had made a &amp;quot;mistake&amp;quot; and meant to say $400,000, but added a zero!), the threat of a fooded market ended the run on gold. Within a half hour, gold went from $162 to $135--a single event ended the panic.  The market turmoil of the past year--ever since the March 10, 2000, Nasdaq high--hasn&amp;#039;t yet featured highly stylish investment bankers swinging from trees. But a look at the recent IPO market reveals a pretty sorry picture. Through February, more than forty companies have postponed or withdrawn planned IPOs, from well-known brands like Dean &amp;amp;amp; DeLuca and AltaVista to &amp;#039;90s-style crapshoots such as Mercata and Petopia.com. Entire weeks go by with no one coming to market. More telling are the dollars that aren&amp;#039;t flying, as investors have stayed away from practically everything. In the fourth quarter of last year, $15.1 billion had been raised. Compare that with $29.2 billion over the same period in 1999. This year, it got even uglier, with a paltry $212 million raised in January versus $3.6 billion in the first month of 2000. And then . . . a single event ended the panic.  KPMG Consulting Inc., the consulting arm that was amputated from Big Five accounting form KPMG LLP, sold 112.5 million shares for $18 each on February 8, raising just over $2 billion. KCIN didn&amp;#039;t triple or even double on the first day, but its 30 percent pop--and the fact that it held on to most of that gain--reminded everyone that companies hit up the American public for reasons other than filling The Industry Standard with ad pages. The world snapped back to normal; investors were again eager to put up money for companies with real revenues and earnings. Wait a tick. Consulting companies going public are part of the problem, not the solution. MarchFirst, Razor fish, Lante, Scient, and Viant all went public over the last few years. Now you can get a subscription to this magazine for about what a share of each would cost--put together. These IPOs were an aberration, exploiting investors&amp;#039; freakish fascination with all things Internet-related. Nowadays, it&amp;#039;s hard to swagger while advising clients how to run their businesses when your own stock&amp;#039;s at $1. That&amp;#039;s why the KPMG IPO is &amp;quot;the biggest thing to happen in the professional-service industry in the last five years,&amp;quot; according to the consultants&amp;#039; consultant, Dean McMann. KPMG is the only large-scale, broadly run consulting firm ever to go public, and with projets of $28 million on revs of $2.4 billion, it&amp;#039;s a real company. Moreover, the success of its IPO is going to encourage--maybe even force--others from the Big Five to follow suit. Look for Accenture and PricewaterhouseCoopers to go next (perhaps the former Andersen Consulting and the twenty-two-letter company could heal thyselves by consulting their way into better names), with Deloitte and Arthur Andersen a little later. The old blue bloods McKinsey and Boston Consulting Group are long shots, but a couple billion could make them true believers as well. The thing is, the firms don&amp;#039;t even get the money. The reason most of them will convert from partnerships, in which they&amp;#039;re entitled to split all the dough at the end of the year, to publicly traded corporations that have to answer to demanding shareholders is so they can untether themselves from their partners in accounting. See, all the consulting firms grew out of accounting firms, which provided the seed money and handed business off from the clients who needed not just audits but other services as well. According to industry veteran Tom Rodenhauser, the consultant trade has grown 20 to 25 percent in each of the last five years while the accounting business is stagnant. &amp;quot;There&amp;#039;s no real reason to be together,&amp;quot; he says, noting several reasons to divorce. The biggest: Consultants have recently become quasi venture capitalists, often taking equity positions in the companies they advise. But there are securities regulations that forbid consultants to invest in any company whose official documents they audit--the potential for looking the other way at dubious numbers being too great. Last July, The Wall Street Journal reported that the SEC was investigating PwC auditors who worked for MicroStrategy prior to its revenue-restatement meltdown to see whether they encouraged Micro to make its partners hire PwC&amp;#039;s consultants. But in going public, KPMG Consulting breaks free from this kind of scrutiny, and it gets a nice little war chest to work with. That&amp;#039;s a tremendous advantage. How valuable is this freedom? Well, Rand Blazer, CEO of KPMG Consulting, gave up $1.8 million for it, taking a pay cut from last year&amp;#039;s $2.8 million to a base salary of $1 million this year. The company&amp;#039;s already seen its employee-turnover rate rise as the fat pay packages dieted. What&amp;#039;s more, a frill like consulting is more sensitive to the whims of the economy than the staid accounting business.  It&amp;#039;s not just money and security these guys are sacrificing but consulting&amp;#039;s coin of the realm: secrecy. Like a lot of partnerships, consultants don&amp;#039;t even like to say who their clients are. As a public company, KPMG will have to reveal all its relevant numbers each quarter; analysts will know not only the identities of the clients but what percentage of the business each represents. If KPMG&amp;#039;s revs are $3 billion and IBM represents 5 percent of its revenues, Accenture can easily use that $150 million figure to go sniffing around for business with a lower quote. But for a group of renegades that has been agitating for a split for almost three years, the benefits of the single life outweigh the sacrifices. For me, too, and I dig this stock. Selling 80 percent of the company to the public for $2 billion implies a total valuation of $2.5 billion--just $100 million more than last year&amp;#039;s revenues, which is awfully cheap. Furthermore, Cisco paid $1.1 billion for a 19.9 percent stake in August 1999. That values the company at $5.5 billion--about twice what an investor coming in today would pay. KCIN is now sitting on capital at a time when it&amp;#039;s hard to come by, which it can use to buy up either small, privately held consulting forms or, even better, the MarchFirsts and Viants of the market. It&amp;#039;s not that these are the best-run companies out there, but their client lists are impressive--MarchFirst&amp;#039;s, as an example, includes American Airlines and Apple--and they&amp;#039;re there for the taking.  KPMG Consulting has put itself in a position to do that taking. It&amp;#039;s sparked a dead IPO market and has left the rest of the major consulting forms a step behind. Getting in on a ground floor this sweet doesn&amp;#039;t happen every day. "^^<http://www.w3.org/2001/XMLSchema#string>
<http://www.esquire.com/news-politics/news/a1271/esq0501-may-portfolio-rev/>