Andersen Group shares gain 47% after $176M IPO

Shares of Andersen Group Inc., the U.S. arm of the professional services firm that succeeded the shuttered accounting giant Arthur Andersen, rallied 47% in its trading debut. 

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The company’s shares closed at $23.50 each in New York, above the IPO price of $16 apiece. At the closing price, Andersen would have a market value of around $2.6 billion based on the outstanding shares listed in its filings.

The firm raised $176 million in an initial public offering pricing shares at the top of the range. It sold 11 million shares at $16 each, according to a statement Tuesday. The company had marketed 11 million shares for $14 to $16 each. The offering attracted investor demand for about 10 times the available shares. 

The San Francisco-based company had net income of $65.7 million on revenue of $668.3 million for the nine months ended Sept. 30. That’s compared with net income of $144.5 million on revenue of $589.2 million for the same period a year earlier.

The consultancy was founded by former Arthur Andersen partners following that firm’s collapse, the website shows. The current firm was launched under a different name in 2002 and adopted the Andersen brand in 2014 following encouraging market research, according to a letter from Chairman and Chief Executive Officer Mark Vorsatz in the filing. 

The company provides tax, valuation, financial advisory and consulting services to individual and commercial clients. Andersen Group employs more than 2,200 people in the U.S. and is part of Andersen Global, a Swiss verein or association of legally separate firms all over the world, consisting of more than 300 member and collaborating firms, the filings show.

The original Arthur Andersen was convicted in 2002 of obstructing a U.S. Justice Department investigation of Enron’s accounting, which prompted hundreds of clients and partners to defect. The same year, US lawmakers passed the landmark law known as the Sarbanes-Oxley Act, which tightened regulations for auditing companies. The Supreme Court overturned Arthur Andersen’s conviction in 2005.

Absence of audit arm

The new Andersen Group does not offer audit services, a core tenet of the former Arthur Andersen business. The absence of an audit arm isn’t about “just the conflicts or independence, it’s the perception of conflicts,” Vorsatz said in an interview. 

“Separating audit and creating it as an independent business is in the best interest of the professions, it’s in the best interest of investors, and in my opinion, it’s in the best interest of the marketplace,” he said. Without audit “we think we’re running this much differently than other firms that we would likely be compared to.”

The firm is going public at a time when private equity has invested in many medium-sized accounting firms. Andersen chose to instead raise capital by going public as they “wanted to be able to control” their own “destiny.” 

“We will not get any solution with private equity where we didn’t have to compromise on control — we were unwilling to do that,” Vorsatz said. The capital raised from the offering will be used for “for technology, for expansion, for infrastructure, for the expansion of our service lines.” 

Arthur Andersen in 2009 agreed to pay $16 million to Enron’s creditors to settle claims that the accounting firm was negligent in auditing and advising the energy trader. Enron, based in Houston, was the world’s largest energy-trading company, with a market value of as much as $68 billion, before it imploded amid allegations of accounting fraud.

Andersen’s offering was led by Morgan Stanley and UBS Group AG. The shares trade on the New York Stock Exchange under the symbol ANDG.