The dismemberment of Arthur Andersen gathered pace yesterday as KPMG Consulting offered $284m (£200m) for up to 23 Andersen consulting units around the world, while another rival, Ernst & Young took over Andersen's substantial tax and audit business in Pittsburgh.
The developments came as government prosecutors moved to the heart of their criminal case against the stricken accounting firm at its trial in Houston, on obstruction of justice charges arising from last autumn's shredding of documents relating to its Enron audits.
KPMG said it had signed a letter of intent covering the consulting business of Andersen firms in the United States, Europe, Asia and Latin America, with a combined 2001 revenue of some $1.4bn – though this figure is likely to fall steeply this year. KPMG, whose consultancy revenues total $2.9bn, has already bought Andersen consulting units in Hong Kong and China.
The deal is subject to separate agreements with each of the Andersen firms involved, and approval by local regulatory authorities. In each case, 90 per cent of partners in each Andersen office must give their consent.
But there can be little doubt they will, now that Andersen has adopted what amounts to a strategy of despair, selling its shrinking assets to meet a torrent of legal claims, and provide a financial cushion of sorts for departing partners and staff. KPMG expects to have definitive agreements within 30 to 45 days.
Apart from the cash payment, KPMG plans to issue up to 6.5m shares – worth $110m at yesterday's market prices – over three years to Andersen consulting partners who join KPMG Consulting in the deal. But it warned that the purchase of Andersen consulting units in the US depended on "the satisfactory resolution of potential liability issues", among them the lawsuit brought by Enron shareholders in which Andersen is a defendant.
The deal with Ernst and Young involves Andersen's tax and audit business, the hardest hit division of the firm, which even before the Enron débâcle had been tarred by other cases of apparent misconduct. The 87 Andersen employees in Pittsburgh will join Ernst & Young's office in the city.
Colgate-Palmolive, meanwhile, yesterday became the latest major company to drop Andersen as its auditor, ending an association stretching back to 1923. A replacement will be announced by the end of this month. Since the start of the year, more than 300 clients have abandoned Andersen, including Merck, United Airlines and News Corporation.Reuse content