A merger of KPMG and Andersen in the Irish market should create opportunities for business growth and increases in employment at the merged firm, according to KPMG managing partner Mr Jerome Kennedy. Last night the international accounting firms announced the opening of negotiations on a merger of their non-US practices.
In a joint statement issued last night, Mr Kennedy and Andersen managing partner Mr Roddy Ryan confirmed the firms were entering negotiations "with a view to merging their two practices in Ireland".
"We welcome the opportunity to put together two of Ireland's leading professional services firms.
"The merger of our two firms will create Ireland's leading professional services firm with some 1,400 people employed and combined turnover in excess of €150 million", the statement said.
KPMG and Andersen confirmed yesterday they were in discussions "surrounding opportunities for the two organisations, outside the US, to come together".
Leading European members of Andersen, the embattled auditor of Enron, have been trying to distance themselves from the criminal indictment and litigation facing the firm in the US. Attempts to merge the global partnership with Big Five rivals Ernst and Young and Deloitte Touche Tohmatsu have been unsuccessful.
Any merger with KPMG will be subject to negotiation with the ringfencing of the US liabilities seen as crucial to success. Mr Mike Rake, chairman of KPMG's Europe, Middle East and Africa region, said: "We are continuing to work together to consider possible ways in which to combine our operations throughout the major markets of Europe, Africa, Middle East, Canada, Asia and Latin America.
"Such a combination would be complementary in terms of geographic coverage and industry expertise."
In the US, Andersen is considering cutting thousands of employees as the troubled auditor responds to the mass defections among its largest clients. The firm, which has 28,000 employees in the US, is preparing to cut costs as it scrambles to salvage its non-US operations through a merger with its rival, KPMG, following the failure to agree on a global deal.
According to people close to the firm, Andersen may now explore the sale of its successful US tax consulting and corporate finance practices, leaving a much-reduced US auditor to concentrate on servicing private and smaller public companies. The viability of its audit business continued to suffer yesterday as Wyeth, the $85 billion (€96.32 billion) pharmaceuticals giant known until recently as American Home Products, became the latest big-name client to axe Andersen as auditor.
Strafford Publications, which tracks changes of auditor in the US, says that this year, not counting most of the defections since the US government's indictment last week, Andersen has lost 46 public company audit clients and gained two.
Mr Kennedy said that while there were a myriad of issues to be resolved, he was very positive about a merger with Andersen.
"As a business proposition it makes good sense in the Irish market and in other countries. There would be no conflict of interest in the Irish market because their audit base is very small here. But it would be important to ensure that the operation would be ringfenced from any litigation out of the US," Mr Kennedy said.
The Financial Times today reports that Andersen's UK arm claimed its destruction of Enron-related documents was part of a long-delayed and much-needed tidy-up. The firm said the working conditions of its Enron audit team in London were so cramped that some people had to stand up to work at their computer terminals.
The comments come after a US Department of Justice indictment of Andersen's US arm last week said the London office undertook co-ordinated destruction of documents just weeks before Enron collapsed in December. The indictment compares Andersen's actions in London with the massive document destruction the firm says took place in its Houston office before Enron's demise.
