Scenarios Emerging for Andersen in OC
By CHRIS CZIBORR
The future of Arthur Andersen’s Orange County office could be taking shape.
Industry sources say most of Andersen’s Irvine audit partners are talking with KPMG International and PricewaterhouseCoopers, while tax partners could go to Deloitte & Touche. Some could go to the OC offices of Deloitte, KPMG and PwC, though they also could end up in Los Angeles and other spots.
Sources say local moves stand to mirror national trends. One Big Five source described what’s going on as cherry picking, with rival firms looking to Andersen partners and practices to “fill weak positions in markets and service lines.”
Another Big Five source said it is “a very safe assumption” that most of Andersen’s OC partners would be absorbed by rivals. But the official said it was too soon to say exactly how things would play out.
“The way these deals work is that there’s a lot of time and diligence,” the official said. “Until a deal is closed, it’s a little premature to say anything, since these deals that Andersen has with other accounting firms are changing every other day.”
Legal concerns are a factor. One official said parties in the Enron-Andersen case are raising concerns about hires and unit acquisitions from Andersen in a bid to keep Andersen’s assets intact,or at least get what they see as a fair price in any pending deals. Possible suitors of Andersen partners and practices also are looking at non-compete pacts Andersen and its workers have.
But the issues aren’t likely to prevent deals, the source said.
“The Big Five firms believe Enron is not going to be a hurdle,” he said. “It’s not delaying anything currently.”
KPMG last month was looking at acquiring all or parts of Andersen’s audit practices at several offices around the country, including Los Angeles. KPMG in OC is reportedly going after audit partners at Andersen’s OC office.
Last week, KPMG Consulting Inc. was poised to buy Andersen’s U.S. consulting arm and parts of its overseas business for more than $250 million.
OC’s Big Five accounting firms last week were abuzz with rumors of where Andersen’s Irvine managing partner Michael Puntoriero would end up. One source said Puntoriero talked to a rival firm about buying Andersen’s Irvine office a month ago, though nothing came of it. Another source insisted Puntoreiro will join PricewaterhouseCoopers.
Puntoriero said late last week he still is with Andersen and it was too soon to report any moves by Andersen staff to rival firms.
“I’m still here,the vast majority of our staff is still here,” he said. “We’re in discussions with multiple (Big Five) firms, but there’s nothing final that I can disclose.”
The fate of Andersen’s some 300 OC workers still is unclear. Some are likely to be hired on by rival firms but not all, according to one source.
“You will see some joining other firms, but it will be fairly disorderly for lack of a better word,” the source said. “You’re not going to see the entire Andersen office get hired by one particular firm or follow one partner or group of partners. Some of the admin folks will get picked up by other firms, but the unfortunate certainty is that it will probably not be all of them.”
Big Five sources said bids for Andersen’s remaining clients and partners now are the focus.
“We’re all scrambling to talk to clients,the large majority of Andersen clients still haven’t switched,” a source said. “Until that happens, we really don’t want to get carried away with hiring until we know what our staffing needs are.”
Andersen’s local office has lost clients but still counts a couple big ones,Irvine-based Exult Inc. and Newport Beach-based Health Care Property Investors Inc. Some big private companies also use Andersen, including Irvine apparel maker St. John Knits International Inc. and Golden State Foods Corp., a food processor and distributor for McDonald’s Corp.
An official from at least one OC public company, San Clemente medical device maker ICU Medical Inc., said his company plans to stay with Andersen for now.
“We’re going to see how the current situation develops,” said Francis O’Brien, ICU’s chief financial officer. “Hopefully they’ll be kept intact either as part of Andersen or part of another firm,we’ve been real happy with the service over the past 10 years and I prefer not to kick a guy when he’s down.”
