More Andersen Clients Flee; Merger Talks Surface Overseas

Big Five firm Andersen is facing almost daily defections of major clients as publicly held companies jump ship in search of another auditor. The latest defections include pharmaceutical group Wyeth, consumer product-maker Sara Lee Corp., drug and medical-product giant Abbott Laboratories, and recreational products manufacturer Brunswick Corp.

Sara Lee paid Andersen nearly $38 million in fees last year, while the other three companies combined paid approximately $30 million in audit and consultancy fees.

Sara Lee voted to drop Andersen even before the firm was hit with a federal indictment last week, stating that the board of directors made the decision when "it became clear that Andersen's viability as an audit firm was in great jeopardy."

Deloitte Back in the Picture in the US

Deloitte Touche Tohmatsu has re-entered into merger talks with Andersen US to possibly buy up Andersen's US tax and consulting business. Deloitte reportedly is not interested in Andersen's US audit business, according to the Wall Street Journal.

Overseas Operations Scrambling to Break Free

In the wake of federal charges against Andersen for obstruction of regulatory and criminal proceedings, many non-U.S. Andersen operations are considering options such as mergers with other members of the Big Five.

"Andersen China is actively engaged in discussions about its future with other accounting firms in the country," according to a statement released by Andersen's China operation.

KPMG is said to be discussion merger possibilities with Andersen operations in major markets of Europe, Africa, Middle East, Canada, Asia, Australia, and Latin America.

"KMPG Australia is assessing the opportunities available following announcements made from London overnight confirming the two organizations are working to consider possible ways in which to combine operations throughout the major markets of Europe, Africa, Middle East, Canada, Asia, and Latin America," KPMG Australia said in a statement. "Discussions will continue over the coming weeks."

Andersen Switzerland told the Associated Press that its branch plans to leave Andersen Worldwide and merge with a rival company. Andersen Worldwide is the organization that oversees the entire Andersen operation in 85 countries, including the United States.

Andersen's Polish and Spanish divisions confirm that they are holding talks with competitors, and a spokeswoman for Andersen's German division stated that the group has been given permission by its partners to break relations with Andersen Worldwide, however no steps in that direction have yet been undertaken.

Meanwhile, Andersen's French operation has indicated it has no desire at this time to leave Andersen Worldwide. Many of Andersen's U.K. partners are looking for jobs outside the firm, while those who plan to remain are reportedly in negotiations with Deloitte & Touche, according to our sister site, AccountingWEB UK. Andersen's U.K. partners face the same unlimited liability as U.S. partners.

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