Ex-KPMG exec Greg Baroni nabs $50M in BearingPoint deals

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Greg Baroni has never forgotten the men and women he worked with for years at KPMG, before a unit of the accounting company was spun off in 1999 and re-branded three years later as BearingPoint.

He lists them by nickname and in near chronological order by hire date. He refers to them as the “class of,” recalling his colleagues like college buddies. He even gets a bit teary-eyed when he talks about what could have been.

Even though that was 10 years ago, Baroni holds on to the memory of dedicated colleagues who shared the BearingPoint vision and the “tragic” disappointment felt when BearingPoint crumbled after its 2001 initial public offering.

So when BearingPoint Inc. filed for Chapter 11 bankruptcy Feb. 18, Baroni decided he could not pass up his shot at resuscitating the company he and his colleagues watched rise and fall.

“I wanted to buy the whole thing,” Baroni said, characterizing his pursuit of BearingPoint’s contracts and talent as a “tenacious” hunt in which he called on BearingPoint CEO Ed Harbach several times, only to be passed on to the sinking ship’s New York-based financial advisers. “‘Talk to Greenhill,’ he’d tell me.”

Although Deloitte LLP took the bulk of BearingPoint’s government business — and most of the publicity — Baroni just closed on $50 million in BearingPoint contracts that Deloitte was forced to pass up in its $350 million purchase.

The deal kick-starts Eclat Consulting LLC, the McLean company he formed less than a year ago to pursue the BearingPoint business. Baroni formed Eclat after a good run at KPMG LLP and Unisys Corp.

The 100 or so federal, state and local government contracts and nearly 200 employees Baroni acquired in late August with his and wingman John O’Neill’s checkbooks — and about $8 million in funding from Access National Bank — is, as the plan goes, the springboard to re-create what Baroni and his colleagues at KPMG set out to achieve in 1999 when KPMG spun off KPMG Consulting Inc., the business that became the ill-fated BearingPoint in 2002.

The company’s prospects turned south even before its shiny new logo hit the market. After the February 2001 IPO, it encountered trouble amid the economic slowdown that year. By then BearingPoint had already lost about 80 percent of its value and emerged strapped for cash. As Baroni tells it, like he still can’t believe it himself, BearingPoint immediately tried going global with disastrous consequences.

He agrees with most experts that the consultancy could have been the “gold standard” of the government-services sector. And it succeeded to an extent: No one claims BearingPoint’s government business led to its demise.

“I’ve always believed the crown jewel of BearingPoint was its public-sector business, and if it were ever set free and planted it would be a highly successful business,” Baroni said.

After unsuccessfully seeking a private equity firm to underwrite his purchase and take only a minority stake in Eclat, Baroni tried the bank route for subordinated debt, a riskier type of loan that gives the lender lower priority on claims against the debt.

In the midst of a financial crisis, that plan didn’t work either.

“Several banks let us down,” Baroni said, noting that one “nearly cost us the transaction.”

Enter Michael Clarke, president of Reston-based Access National. His bank managed to work out a bridge loan to Baroni and O’Neill. It also agreed to a credit facility of approximately $7 million in about eight weeks. The two parties were expected to sign the credit facility by Sept. 11.

With the deal done, Baroni says growth at Eclat will be narrowly focused on government customers, primarily federal. It won’t seek international government markets anytime soon. Chalk that up to lessons learned from BearingPoint.

For now, Eclat’s two biggest clients are the Army and the Department of Veterans Affairs. The VA was a fairly large chunk of BearingPoint business that Deloitte had to pass up because it already provides services that would pose a conflict of interest.

Eclat isn’t trying to compete with the big guns, at least not in the next three to five years. Deloitte’s new government work immediately rockets its government services division from $400 million in annual revenue to $1.2 billion, company officials say.

The problem Deloitte faces will be getting the new talent from BearingPoint to stick around, Baroni said. “As with many large acquisitions, there could be considerable turnover. … I’m going to be a magnet for those people.”

For now Baroni will enjoy being “a little guy” again, he said, with a calculated grin. He is ready to take on the risks of building a major contender from scratch, just like the young team did at KPMG.

“People forget how small we were,” he said. “We were just north of $50 million in the mid-1990s. By 2001, we were just shy of a billion.”