Andersen to sell itself off

Sam Seymour, attorney for former Arthur Andersen employee David Duncan, leaves the federal courthouse in Houston, Wednesday. PHOTO: AP

Arthur Andersen announced separate deals Wednesday with KPMG Consulting, Deloitte & Touche and Ernst & Young to sell various parts of its business, the first of what is likely to be a series of transactions that Andersen rushes to conclude before the criminal case against it goes to a jury.

KPMG Consulting, which spun off from the Big Five accounting firm KPMG last year, has entered into a nonbinding agreement to pay as much as US$284 million for the bulk of the consulting business of Arthur Andersen and Andersen Worldwide, the international network of accounting firms to which Arthur Andersen belongs.

Andersen also announced that it had closed a deal with Deloitte & Touche for the sale of much of Andersen's tax advisory practice. Under the deal, which was announced several weeks ago, about 2,000 Andersen employees in offices across the US would move to Deloitte. Other terms of the transaction were not disclosed.

Separately, Ernst & Young announced that it had acquired Andersen's tax and audit practices in Pittsburgh for an undisclosed sum.

The different transactions are evidence of the pressure on Andersen to close deals as quickly as possible before the federal judge overseeing the firm's trial for destroying documents related to its audit of Enron turns the case over to a jury later this month. A verdict in that criminal trial could have a devastating effect on merger or acquisition discussions, lawyers said.

"They want to get it done," said Rod Howard, co-head of the mergers and acquisition practice at Brobeck, Phleger & Harrison, a San Francisco law firm. "There's a lot of uncertainty. Let's assume the worst, they get a bad verdict: It may make it impossible or certainly more difficult for them to get their deals done."

The problem for potential buyers is simple, Howard said. If Andersen manages to beat prosecutors at trial, then the firm may no longer want to sell any of its pieces. If the firm is convicted, then no one knows what will happen, he said.

Any deals that Andersen can complete now means that it will have more cash to work with later, and that will be useful no matter what the verdict, said Mark MacDonald, a bankruptcy lawyer in Dallas.

"Having a little liquidity is good because even if you win, you're going to need liquidity," he said. "Just because you win the criminal trial doesn't mean you're out of the woods."