Those with long memories will note the irony as Deloitte now gets bitten by the merger bug, stealing Andersen in the UK away from KPMG right under its rival’s nose.
Deloitte had cannily watched from the sidelines as KPMG announced it would seek to merge with Enron’s former auditor and then stood quietly by as first Ernst & Young and then PricewaterhouseCoopers picked up practices.
First PwC announced it had picked up the choice Hong Kong and China practices of Andersen; then Ernst & Young confirmed it was merging with Andersen in Russia and New Zealand. Meanwhile, E&Y continued acquiring: Australia was next with Singapore swiftly joining its burgeoning empire.
Deloitte entered the fray a fortnight ago, picking up the Spanish practice of Andersen. Not only was this the withdrawal of the first European practice from the KPMG tie-up, Spain was a market where Andersen was the number one firm. Within days it was proved how central Spain’s role as a gateway to South America is: Deloitte announced it would merge Mexico.
The Big Five map is now being redrawn. In the UK the Deloitte-Andersen tie-up moves Deloitte up to number two in the Accountancy Age league table.
It’s a bitter irony: had KPMG pulled off the Andersen deal it would have been breathing down the neck of PwC. Now instead of jostling for the number one slot, it sees itself slip to number three.
But questions remain. Andersen partners in the UK have been named in the US indictment. Should there be action against the firm as a result, has Deloitte sufficiently ring-fenced the potential liability? KPMG says it took advice from three sets of lawyers, none of which could find a way around the issue of liability.
And then there is the small matter of regulatory approval. Andersen is already in talks with the European Commission, the Financial Services Authority has concerns and the Office for Fair Trading has been urged to intervene.
But it’s not just a UK issue: this is a global merger now. Deloitte picked up Canada this week to add to its new Spanish-speaking practices.
Can regulators stomach a worldwide shrinkage of 20% in terms of the number of auditors of the world’s most powerful companies?