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Tuesday, 12 March, 2002, 08:00 GMT
Enron auditor juggles two suitors
Andersen logo
Andersen is thought to have lost at least 30 clients
Andersen, the US accountancy firm at the centre of the Enron bankruptcy scandal, is reportedly in talks to sell itself to one of two major rivals.

If a deal is clinched with either Ernst & Young or Deloitte & Touche, Andersen would file for Chapter 11 bankruptcy protection in the US, the Financial Times has reported.

World top five accounting firms
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Ernst & Young
Andersen
The accountancy firm is working to secure an announcement of a tie-up within the next two days, the newspaper said.

Andersen has lost several prestige clients and come under close scrutiny from others for its part in last year's collapse of US energy giant Enron with huge hidden losses.

Federal prosecutors are believed to have made clear to Andersen last week that they were willing to seek a criminal indictment against it.

Bankruptcy plan

Under the terms of the proposed take-over deals, Andersen would file for Chapter 11 bankruptcy protection, the FT said.

This would allow any merger partner to purchase Andersen's US assets and would in turn provide cash for the firm to settle any claims against it.

Andersen faces potential civil and criminal settlements, as well as legal fees, which together could add up to billions of dollars.

Such a cost could prove ruinous for the company and is one reason why any merger partner would proceed with caution.

If Andersen fails to find a new global partner, parts of the giant audit firm could break away.

The FT said it had learned the auditor's European partners in several countries were already in talks about a possible break-up plan, and were looking at options for local deals.

Final catalyst

Talks with Deloitte reportedly began last week in New York after it emerged that Andersen may be indicted by the US Justice Department on criminal charges for shredding documents relating to Enron's financial woes.

An obstruction of justice case could deal the final blow to the firm's reputation and client list.

Andersen's lawyers are reported to be negotiating with federal prosecutors in the hope of striking a deal that avoids criminal charges.

So far, Andersen is thought to have lost more than 30 clients which provided it with combined annual fees of about $100m.

Among the most high-profile clients to abandon Andersen were Merck, the multinational pharmaceutical company, which ended its 31-year relationship with the audit firm, and Delta Airlines, a top five US carrier.

Tie-up talks

The firm has denied feeling any financial ill-effects to its business, but admits its needs to change its structure to survive.

Talks with Deloitte are reportedly being held in New York, led by the chief executives of the two audit firms.

Andersen declined to comment on what it said were "rumours in the market".

The Andersen name is likely to disappear in any tie-up.

 WATCH/LISTEN
 ON THIS STORY
Accountancy Magazine News Editor Julia Irving
"They must be expecting more major clients to walk"
See also:

02 Mar 02 | Business
Andersen suffers double blow
05 Feb 02 | Business
Audit giants called to account
29 Jan 02 | Business
Andersen on the defensive
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