Andersen's Baltic offices look for way out

  • 2002-04-11
  • Timothy Jacobs

The Baltic affiliates of Andersen Worldwide, the global arm of the troubled U.S.-based auditing firm Arthur Anderen, are in merger talks with three rival firms.

According to Per Moller, managing director of Andersen Baltics, the company expects to close a deal with one of the firms by week's end.

"We are trying to determine which of the three companies offers us the best fit locally, and what is the direction of the companies that we may merge with," said Moller.

The three companies that Andersen is considering are KPMG, Ernst & Young, and Deloitte & Touche. PricewaterhouseCoopers, the remaining "Big Five" firm and the largest auditing firm worldwide and in the Baltics, has not bid for Andersen's affiliates.

Top officials from the Baltic offices of Deloitte & Touche, KPMG and Ernst & Young confirmed that talks were ongoing but would not comment on the specifics of a possible deal.

Andersen is looking to merge because the company's reputation has been sullied in recent months as the auditor of Enron, the American energy giant which last December filed the largest corporate bankruptcy claim in history.

Enron collapsed last September after it became known that the company had been falsely posting profits while losing millions. The company's share price has dropped to less than $1 per share, down from over $80 per share a year ago.

As Enron's auditor, Andersen allegedly failed to ensure the company reported all of its revenue and losses accurately and now faces lawsuits from angry Enron shareholders.

Until recently, it appeared that Andersen would be able to stay somewhat intact, even after it was indicted for obstructing justice for shredding Enron documents. The company had hoped to unload all of its non-American member firms onto KPMG and salvage something of the Andersen network and corporate culture.

The plan failed when Andersen's affiliate in Spain declared April 2 that it would merge with Deloitte & Touche.

That decision opened the floodgates, as affiliates in Australia, China, Hong Kong, New Zealand, Russia, Singapore and Thailand have all decided to cut their own deals. Andersen and KPMG have admitted that "a deal embracing all of the non-U.S. firms is not achievable."

According to a spokeswoman for Andersen Worldwide, there are still 76 countries in talks with KPMG. Since the decision by the Spanish affiliate to break ranks, though, affiliates have taken an "every man for himself" attitude by taking the best offers after assessing their company's situation regionally.

But those deals still may fall prey to Enron lawsuits. Attorneys representing Enron shareholders, including several large state pension funds, announced this week they were filing additional lawsuits against several investment banks and Andersen Worldwide.

In addition, a group of insurance companies filed an injunction with a Texas court to keep Andersen from restructuring and selling its assets to keep them away from claimants.

According to Moller, Andersen's businesses in the Baltics have been performing well and have not lost any clients due to the Enron scandal.

"The name has been damaged, but the companies here are doing well, and we are not expecting any layoffs," he said.

Officials from refute Moller's claim that Andersen Baltics hasn't lost clients to their companies since the Enron scandal surfaced. One thing that is certain is that Andersen will take on the name of whatever rival company it decides to merge with.