The auditing firms Andersen and Ernst & Young on April 15 signed an preliminary agreement to merge their operations in Estonia, Latvia and Lithuania in the wake of the Enron scandal in the United States.
The planned deal in the Baltics is the latest in a string of mergers of Andersen and Ernst & Young around the world in recent weeks, including those in Norway, Russia and Poland.
"This has everything to do with Enron and the damage it has caused the Andersen name," said Per Moller, managing director of Andersen in the Baltics.
Moller said the new company would operate under Ernst & Young's name.
"We have removed the uncertainty surrounding our future," he said.
The merger will not bring any layoffs, Moller said.
The new company will include more than 250 employees and generate about $10 million in annual revenues.
Moller expects the deal to be completed within a month.
"We still have to work out the due diligence on client information and to sign a deal structure," said Moller. Ernst & Young's Baltic operations are currently run from Sweden, and Moller said that they would have to establish an Ernst & Young Baltics before the merger was completed.
Officials from Ernst & Young declined comment.
The merged company will be at or near top in terms of market share in all three countries.
"We will be number one in Lithuania, we will be competing for the number one spot in Latvia with PricewaterhouseCoopers, and Deloitte & Touche, and we will be third in Estonia" said Moller.
Moller sees the deal as beneficial to both Andersen and Ernst & Young.
"Andersen has a broader client base in the Baltics, and Ernst & Young has strong connections to the countries most involved in investing in the Baltic countries like Sweden, Germany and the U.S.," he said.
Officials from the U.S.-based Andersen L.L.P. have been indicted on obstruction of justice charges for shredding Enron documents after the U.S. Securities and Exchange Commission started investigating the collapsed energy trader.
Several lawsuits have been filed against Andersen Worldwide recently by attorneys representing Enron shareholders, but Moller does not believe that the lawsuits will effect Andersen Baltics or the merger.
"Andersen Baltics was very distanced from Andersen L.L.P. under the management structure that was in place," he said.