Andersen UK in last minute rescue attempt

Andersen's UK partnership is desperately trying to convince rivals to take it over before the beleaguered global accountancy firm implodes.

Deloitte & Touche, which had ruled itself out of an Andersen deal just last week, is now understood to be in talks over the UK and European operations of its embattled competitor.

After the US indictment of Andersen, issued late on Thursday, stunned the firm's London office by implicating it in the shredding of Enron documents, John Ormerod, managing partner of Andersen UK, quickly opened discussions with rivals.

Mr Ormerod said last night: "Although we remain supportive of a global initiative for the future, we also have to realistically look at other options if a global initiative does not work out."

John Connolly, Deloitte's senior partner in London, is leading the negotiations with Mr Ormerod though a deal is not thought to have been thrashed out over the weekend. Deloitte is also interested in Andersen's European practices and there are parallel talks over those.

"They [the UK firm] are looking for a lifeline," said one accountancy source.

The preference of Andersen's leaders remains a global deal, though this looks increasingly unlikely and territories outside the US have started looking for their own way out.

"We're waiting to see which way it breaks up," said a source at one Big Five firm. "In the UK it looks as if Ormerod doesn't want to get left out in the cold."

KPMG is looking at Andersen's European business and there are suggestions it may be interested in a global deal, despite the litigation risk stemming from Andersen's work for Enron, the collapsed US energy group.

Ernst & Young has ruled itself out of a global deal but it is watching from the sidelines to see if there are parts of Andersen or its individual partners that it should snap up. PricewaterhouseCoopers, easily the largest of the Big Five, has so far shown no interest. It would face the biggest regulatory hurdles to a deal.

Smaller firms BDO Stoy Hayward and Grant Thornton are also examining a possible takeover of Andersen UK.

Andersen is already losing clients in this country, as companies panic over having an auditor that is in crisis. Mayflower, the engineering group, has ditched Andersen while it emerged over the weekend that so had Wireless Group, the radio company. Andersen's FTSE clients include BSkyB and WPP, who are known to be monitoring the situation.

Andersen has admitted Enron documents were destroyed in the UK but maintains that these records were of no importance.