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Andersen break-up accelerates outside US

The break-up of Andersen's non-US operations accelerated on Wednesday as its Singapore arm tied the knot with Ernst &Young just a day after talks on a global merger with KPMG fell apart.

KPMG had hoped to strike a global deal with Andersen outside the US but dropped these plans after a string of defections by Andersen partnerships, including Spain, which signed up with Deloitte & Touche on Tuesday.

The beleaguered accounting group has been indicted in the US for its role as auditor of energy trader Enron, which filed for bankruptcy protection last year. It is target of billion dollar lawsuits and has suffered a mass client exodus.

Andersen's partnerships are separate entities which, in current circumstances, seem able to choose which of the remaining "Big 4" global accounting firms to combine with.

KPMG and Andersen are still talking in certain countries, including the UK, continental Europe and Sweden, despite the collapse of the worldwide merger.

ASIA TALKS

Andersen in Sweden was hopeful of a deal with KPMG by the end of April. "We are talking with KPMG in Sweden and we have that as our main target," said Hans Pihl, head of Andersen's Swedish arm. "We have had very positive meetings and we are making good progress," he told Reuters.

Ernst & Young, which has also picked up Andersen's operations in Australia and New Zealand, is talking to Andersen in Taiwan and elsewhere in South East Asia, sources familiar with the situation said.

KPMG had only weeks earlier announced support from a range of Andersen's Asian units for merger talks. So far it has only formed an alliance with Andersen in Thailand and is trying to clinch a merger in Japan.

Meanwhile, the board of Andersen Worldwide, the umbrella body for Andersen's global operations, held a second day of talks in London, which could run into Friday. The board's agenda includes a successor for chief executive Joseph Berardino, who resigned last week.

There has been speculation about Andersen job cuts in the UK, but a spokeswoman said it was too early to say anything on this. An executive at a UK firm of headhunters it they had seen an increasing number of Andersen people in recent days.

BETTER CHEMISTRY

In Singapore, the combined Andersen/Ernst & Young operation, which will trade as Ernst & Young, will be the market leader.

"The combined firm will have about 200 listed companies which will make us about three times the size of our next competitor," Fang Ai Lian, managing partner of Ernst & Young Singapore, told a news conference. PricewaterhouseCoopers is the next largest firm.

The enlarged Singapore entity, to be headed by Fang, will have a total workforce of about 2,000 and 80 partners.

"There is strong strategic reason for us to work together as the chemistry among the partners is really excellent," said Steven Lim, managing partner of Andersen Singapore.

In New Zealand, the newly created unit of Andersen and Ernst & Young aims to finalise the merger within three months.

Partner Wayne Jackson said: "We have an official target date of July 1 to have everybody under the same roof, on the same systems ... the general feeling is the sooner the better."

The merged entity will be the second largest accounting firm in New Zealand, with 800 staff and 63 partners, behind PricewaterhouseCoopers. Jackson said the merged Ernst & Young and Andersen would also gain from a similar move in Australia, announced last week.

Asahi & Co, Andersen's Japanese partner, is sticking to plans to merge with KPMG.

"There is no change in our stance to seek an integration with KPMG and we think last week's agreement will be honoured," said an Asahi spokesman.

Asahi last week signed a memorandum of understanding with KPMG that enables its clients to use KPMG's service outside Japan. Asahi said the pact would open the door for the two firms to launch full scale merger talks.

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