Andersen near deal with KPMG on non-US operations

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The Independent Online

Andersen, the accountancy firm at the centre of the Enron scandal, is close to agreeing the sale of its operations outside the US to its rival Big Five auditor KPMG in a deal likely to see thousands of job losses and the death of Andersen as a global brand.

While nothing has been signed, a source close to the discussions between the firms said there was "an excellent chance" of success. Another even said it was "a done deal".

KPMG's lawyers are thought to have advised the firm that it is possible to pick up selected members of the Andersen Worldwide global organisation without becoming liable for damage claims against the Houston office, which audited the collapsed US energy giant Enron.

But even if KPMG satisfies itself that it can insulate itself from such claims, it will struggle to win regulatory approval for a deal that will see the global auditing industry slim to just four players.

The firms issued a joint statement yesterday warning that completion of the deal was subject to "further negotiation" and required approvals not only from regulators but also from local partners. Both organisations comprise a nominal global holding company overseeing separate member firms in different countries.

Mike Rake, the chairman of KPMG Europe, Middle East and Africa, said: "A combination would be complementary in terms of geographic coverage and industry expertise."

Aldo Cardoso, the chairman of the board of Andersen Worldwide, said: "Any such combination ... represents an outstanding opportunity for our partners and people."

Last week rival Big Five firms Deloitte Touche Tohmatsu and Ernst & Young pulled out of talks with Andersen. PricewaterhouseCoopers, the world's largest accounting firm, is not thought to have shown any interest.

Andersen has been losing clients since Enron's collapse in October, and at an accelerated pace since the US Justice Department earlier this month said the firm faced obstruction of justice charges over the shredding of documents. Andersen offices outside the US, including in London, were indicted last week. The latest twist in the Enron-Andersen saga came amid reports from City headhunters and rival audit firms that partners in Andersen's UK operations were trying to quit.

In the US, Andersen has lost lucrative clients including the drugs giant Merck and Federal Express. Its UK operations, the largest of its European offices, continue to do audit work for Cadbury Schweppes and BSkyB.

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