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Merger promises to bring rewards

ERNST & Young will consolidate its position as the largest professional service provider in WA, and the second largest in Australia, if the proposed merger with troubled accounting firm Andersen Australia goes ahead.

The merger, which is subject to a vote of approval by the partners of Ernst & Young and Andersen Australia (who are expected to back the deal) and normal due diligence and regulatory approval, is expected to be completed by as early as May.

Ernst & Young Australia chief executive officer Brian Schwartz said the proposed integration of the two companies was a positive move for both firms that would substantially strengthen the presence of Ernst & Young in the marketplace. It also would add significant value to the people and clients of the existing Ernst & Young and Andersen firms.

“We believe this integration will provide certainty and opportunity for Andersen’s people and clients,” Mr Schwartz said.

Andersen chief executive officer Garry Hounsell said that, through the integration with Ernst & Young, they can now move forward as part of a larger organisation with strong global ties.

He said it would benefit Andersen’s clients and give the staff at Andersen enhanced opportunities for the future.

“We are confident that Andersen’s clients and staff will see this arrangement as a unique and exciting opportunity to create a stronger platform for future growth,” Mr Hounsell said.

The seemingly imminent demise of Andersen has caused some concern in audit circles. Instead of the big five – PricewaterhouseCoppers, Ernst and Young, KPMG, Deloitte Touche Tohmatsu and Andersen – big ticket clients will only have the big four firms to choose from.

Added to that are suggestions that there be a total separation of services so one firm cannot both audit and offer consulting services to the same client.

CPA Australia WA chief executive officer Justin Walawski said there was a danger the big four firms may stop doing audit work if the separation of services suggestion came to pass.

“This could lead to a creation of a new market,” Mr Walawski said.

Institute of Chartered Accountants in Australia chief executive officer Stephen Harrison said the reduction to the big four was not a big problem in itself.

“It will become a concern if the big four reduces to the big three,” Mr Harrison said.

“It has been a real concern that a firm the size of Andersen could get itself into such a situation so quickly.”

Australia’s competition watchdog, the Australian Competition and Consumer Commission, is currently in the process of examining the proposed merger against what they termed as the “alternative state of affairs” in reference to what would occur if the merger did not proceed.

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