Search the Internet          Tips  Sites: Finance, Investment

KPMG seen facing Andersen merger woes in Asia

Accounting firm KPMG's ambitions to expand its operations in the region by merging with the Asian units of troubled rival Andersen appears to have hit a snag in Singapore and Japan on Monday.

The non-US units of Andersen have been actively engaged in merger talks with rival audit firms as it faces investor, and possibly criminal, litigation in the United States over its audit of collapsed energy giant Enron Corp.

However, KPMG is making headway in Thailand where Andersen said on Monday it had agreed to form a business alliance with KPMG, ending speculation over possible mergers with rival firms.

The combination of KPMG and Andersen in Asia Pacific would create the region's largest accounting firm with about $2 billion in revenues and more than 28,000 staff.

Andersen Singapore said it was in talks with Ernst & Young but had yet to reach a final decision on whether to merge with the firm, a senior official told Reuters.

"We're in talks but no final decision has been made. We have not signed (the MOU) at this point in time," the source said, but declined to comment on whether Ernst & Young had made a more attractive offer than KPMG nor provide further details.

Local reports quoting unnamed sources on Monday said Ernst & Young had beaten KPMG and was on the verge of signing the MOU with Andersen Singapore.

"We are unable to confirm at the moment," a spokeswoman from Ernst & Young told Reuters.

DOUBTFUL

Separately, Shin Nihon & Co, KPMG's Japanese accounting partner, said a merger between KPMG and Andersen's Japanese partner, Asahi & Co, was doubtful despite their agreement last week to seek an integration.

A spokesman for Shin Nihon said Asahi would not be allowed to merge with KPMG unless Shin Nihon agreed to amend its current contract with KPMG regulating its status as KPMG's exclusive member firm in Japan.

"Unless we agree to amend the contract, it is impossible for Asahi to become a member firm of KPMG," said Masakatsu Kakitsuka, a spokesman for Shin Nihon.

"And we have no interest at all in changing the contract now."

Shin Nihon -- one of the nation's four largest accounting firms along with Asahi -- currently has a tie up with KPMG and Ernst & Young.

Asahi spokesman Tomoyuki Yamanaka said talks on the potential alliance had just started and that he could not immediately comment on any details now.

"It's too early to say anything definite about what our alliance would be like, since all the details should be nailed down through further discussions with KPMG," said Yamanaka. He said he could not confirm whether Shin Nihon is likely to join the negotiations.

KPMG in Singapore declined to comment, while officials from KPMG in Japan were not immediately available.

Several Asian units of Andersen have since defected to other rivals despite KPMG initially garnering support from 13 Asian units.

Andersen's Hong Kong and China units have decided to combine with rival PricewaterhouseCoopers, while Andersen in New Zealand and Australia had reached a similar agreement with Ernst & Young. Andersen's Australian unit made that decision after rival bidder Deloitte Touche Tohmatsu failed to settle differences over a string of Andersen liabilities.

Colin Holland, KPMG International's Brussels-based chief operating officer, flew into Singapore in late March -- his second visit in as many weeks -- to resume talks with Andersen officials from nine Asian countries after the defections.

ALSO READ:
The Enron Saga
The Rediff Budget Special
Money

Tell us what you think of this report