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 | | Tuesday, 2 April, 2002, 17:24 GMT 18:24 UK Andersen-KPMG merger on the rocks  Andersen is still losing clients Andersen has admitted that it has no chance of stitching together a worldwide merger with rival accountants KPMG, after failing to persuade all its regional units to sign up to the deal. "In view of the decisions by certain individual firms to pursue different directions, it is clear that a deal embracing all of the non-US firms is not achievable," Andersen Worldwide said in a statement. It insisted, however, that talks between the two firms continued at a country level in various locations, but did not speculate on what sort of deal could be salvaged. The statement came after several days of speculation that the Andersen-KPMG merger could come off the rails - talk that intensified on Tuesday after the defection of certain key Andersen units. Things fall apart Andersen's consulting arm, source of about one-seventh of its revenues, confirmed that it will play no part in merger talks with KPMG, which in theory should cover all operations outside the US. And its Spanish unit - considered one of its most important assets - also ruled itself out of the merger, following in the footsteps of a string of regional affiliates over the past couple of weeks. A worldwide merger had been seen as the best hope of salvaging those parts of Andersen untainted by the effects of the collapse of Enron, the energy trader whose books were audited by Andersen's Houston office. But the deal quickly ran into opposition among Andersen operations in Asia. Offices in Australia, New Zealand and Russia now plan to merge with Ernst & Young, contractual difficulties make it look increasingly unlikely that Japanese staff will side with KPMG either, and Hong Kong and China operations are now talking to PricewaterhouseCoopers. The defection of the Spanish office is the first in Western Europe, seen as the most important region for the two firms. Wanted: Boss These complications further obstruct the work of the Andersen board, which is currently meeting to try to find a new chief executive.
A conference call among Andersen partners last Thursday failed to produce a candidate to replace Mr Berardino. Tuesday's meeting, in London, looks likely to extend into Wednesday. An Andersen spokeswoman was unable to say when any public statement might be forthcoming. Under the gun Andersen needs to fill Mr Berardino's shoes, not least because partners and staff in the US want the company to stay afloat as a going concern.
The company is still facing charges in the US relating to its Houston office's decision to shred Enron-related documents even after the federal investigation into the latter's collapse had begun. Unless they are lifted - and according to the New York Times, Andersen will have to come clean in public about the shredding to stand any chance of that happening - the firm may well go out of business. The case goes to court in Houston on 6 May amid accusations from prosecutors that the firm is trying to sway witnesses. "Andersen has embarked on a massive campaign to flood the public record with slanted and outright false renditions of evidence in the case," the prosecution said in a brief filed last week. More defections On top of that, it is losing clients fast as firms big and small decide the risk of being associated with Andersen is too great. Monday brought three more defectors, in the shape of household products firm Newell Rubbermaid, Pacific Capital Bancorp and SPX Corp, a maker of industrial and technical products, That takes the number of clients lost to more than 100 since the start of 2002. The survival plan pushed by former Federal Reserve chairman Paul Volcker - which received backing from the 1,700 US partners last week - is still seen as the firm's best hope. But it only applies to the US arm of the business. | |
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