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Tuesday, 19 March, 2002, 05:46 GMT
Andersen regions in break-up talks
Andersen logo
Andersen has lost clients and now faces losing staff
Top executives at accountancy network Andersen - whose US business is under fire for its role in the collapse of Enron - are fighting to prevent regional defections that could scupper efforts to secure a rescue merger.

In Germany, Andersen's local management issued a joint statement with rival KPMG saying they were in talks over a tie-up.

Furthermore, it could involve all the audit firm's major markets outside the US.

"We are currently exploring how our current business activities outside the United States in the most important countries of Europe, Africa, the Near East, Canada, Asia and Latin America can be merged," said head of KPMG Germany Harald Weidemann.

Christoph Gross, head of Andersen Deutschland, said: "This is a chance we want to use in the interests of our clients and employees."

Andersen offices in Australia, Europe and China have also revealed they are considering quitting the group and merging with rival accountancy companies.

Relaxing the rules

In the meantime, the US Securities and Exchange Commission has issued formal guidelines for Andersen clients, providing temporary relief on their obligation to file financial statements.

From Monday, companies that cannot or do not want their audits to be completed by Andersen will be allowed to submit unaudited statements on a temporary basis.

The SEC's move is likely to increase the exodus of customers away from Andersen, many of whose clients were reluctant to decamp during the reporting season.

Job-hunting

In the UK, where Andersen chiefs are believed to have held tie-up talks with Deloitte Touche, the firm also faces a staff exodus, reports said.

"We are seeing an increasing number [of Andersen staff] at all levels," said Martin Purrier of recruitment firm Hunter Walker.

A boss at a rival UK accounting firm claimed that growing numbers of Andersen employees, including senior partners, were seeking information on jobs.

The reports will disappoint Andersen chiefs attempting to keep the network together after the indictment last week of Andersen's US business over claims it shredded "tons" of paperwork relating to the collapse of energy firm Enron.

Andersen also faces a one-year suspension on new US government business and has seen about 50 firms, including Delta Airlines and drugs firm Merck, quit for other auditors.

Pharmaceuticals company Wyeth on Monday became the latest firm to ditch Andersen.

France u-turn?

National operations revealed on Monday to be holding independent merger talks included:

  • Switzerland, where partner Edgar Brandt was quoted as saying: "We're studying all the options without panicking."

  • China, where Andersen bosses said the firm was "actively engaged in discussion about its future with other accounting firms in the country".

  • Australia, where regional boss Gary Hounsell said the firm was continuing "to canvas a range of local and regional options".

  • Poland, where the branch said it was "trying to take into account all possibilities".

French operations were on Monday declining to comment on reports of merger talks with competitor Deloitte & Touche.

Andersen France chairman Aldo Cardoso said in an interview with Monday's Les Echos newspaper that European Andersen operations wished "to continue to be part of the network".

"Of course certain firms could decide to leave," he said.

"But in Europe, apart from Spain... nobody has chosen this path."

Takeover prize

The Andersen Worldwide network employs about 85,000 staff in 390 offices in 84 countries.

Andersen Worldwide chiefs have sought to find a buyer for large chunks of the network, or even all operations, to maximise selling power.

"In Europe, Andersen's united force would be reduced by individual negotiations," Mr Brandt of Andersen Switzerland said.

But the network's structure means that individual offices have been able to undertake independent negotiations.

And, by distancing themselves from Andersen's beleaguered US business, regional offices have sought to secure a higher price, observers said.

Risks and rewards

Andersen, as a partnership, splits profits between its 5,000 partners, rather than with shareholders as it would as a listed company.

The partnership structure, common in professions such as law and accountancy, can offer the chance for large rewards, and employees often pay to gain partnership status.

But with a split in profits comes joint liability, a prospect that, with Andersen's future clouded, is blamed for spurring interest in jobs elsewhere.

 WATCH/LISTEN
 ON THIS STORY
Damien Wilde, editor, Accountancy Age in London
"The US firm has an indictment hanging over it and the rest of the world doesn't."
The BBC's Marcia Hughes
"The Anderson brand has taken a beating"
See also:

15 Mar 02 | Business
US bans Andersen from official work
15 Mar 02 | Business
Andersen UK denies Enron cover-up
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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