ANDERSEN CONSULTING
Break-up will be costly, Phillip Inman reports
Arthur Andersen executives will file a response in the next few days to the demand by Andersen Consulting partners for an irrevocable divorce.
The firm said that papers would be sent to the Paris-based International Chambers of Commerce, which will act as an arbitrator during divorce proceedings in readiness for meetings later this month.
Top executives at Arthur’s are still keen to prevent the break-up of Andersen Worldwide, currently the largest professional services firm in the world, despite the almost unanimous vote by Consulting partners to force a split.
Arthur Andersen managing partner Jim Wadia is expected to reiterate the conciliatory proposals he made to Consulting partners before Christmas.
But he will also set out the $9bn damages Arthur Andersen will expect, equal to one and a half times its annual turnover.
The dispute, revealed exclusively by Accountancy Age in 1996, centres on demands by Andersen Consulting to end the current partner profit scheme.
Consulting partners complain that Arthur Andersen creams off a large amount of income – thought to be about $100m annually – under arrangements set up in 1989 when Consulting became a separate entity. This money, it argues, has been used by Arthur Andersen to finance expansion of its own consultancy business.
Independent analysts Gartner Group said there was no hope of reconciliation.
The firm’s consulting analyst, Linda Cohen, said: ‘They have a problem because all of a sudden they look small compared to their rivals. They will be in trouble if they fail to recruit more people and grow quickly.’