Regulators concerned over Andersen-KPMG merger

Andersen and KPMG are on collision course with regulators after revealing details of a proposed tie-up.

The Financial Services Authority (FSA) fears a takeover of Andersen's global operations outside the US could limit choice.

KPMG and Andersen - two of the world's so-called Big Five - announced last night they are involved in discussions.

The talks come as Andersen's US operation faces up to criminal charges brought by the US Justice Department relating to the Enron scandal.

The tie-up would create a firm with annual revenues of more than £12 billion(€19 billion) and include nearly 160,000 partners and staff worldwide.

KPMG is the larger of the two firms in the UK, with 12,000 staff and 690 partners, while Andersen has 6,500 UK employees and nearly 500 partners.

Andersen, which will lose its name through the merger, said it did not currently envisage any job cuts resulting from the merger.

But the FSA is worried about the implications for UK businesses, particularly multinationals: "We are concerned that having just four global firms would be damaging to choice."

The FSA made similar comments at the time of the merger of Price Waterhouse and Coopers & Lybrand in 1998. It is thought the latest attempt at consolidation could attract the attention of the Competition Commission.

But Andersen's UK managing partner John Ormerod said he hoped regulators would look at the proposals in a favourable light as they were "exceptional arrangements in exceptional circumstances".

Andersen said it received approaches from other quarters - thought to include Deloitte & Touche - while it also considered an independent future for the non-US operation.