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Ernst & Young may see shake-up after acquisition

Bhupesh Bhandari and Pradeep Gooptu

Professionals from Arthur Andersen might replace some of the persons heading its various practices, after its acquisition by Ernst & Young is through.

"We will see to it that only the best people head practices of the firm," Kashi N Memani, chairman and managing partner of Ernst & Young, told Business Standard.

He said this could lead to the replacement of some existing heads. Bobby Parikh, the country managing partner of Arthur Andersen, will be the chief executive of the merged entity.

Ernst & Young has practices like audit (which is under S R Batliboi & Co), corporate finance and tax. While audit was its largest practice, corporate finance was fast catching up, Memani said.

After acquiring Arthur Andersen, Memani expects the firm to have a substantial tax practice. "Our talent pool has become very formidable," he said.

To ensure a smooth integration of Arthur Andersen into Ernst & Young, Memani said an integration committee would be set up soon after the legal formalities of the acquisition are over in a few days.

"Its mandate will be to achieve harmony in the organisation without creating any misgivings in the minds of people," he said.

According to Memani, there are no major cultural issues involved in the integration.

"Culturally, we have also moved ahead in the last 4-5 years," Memani said, adding that diversification into new practices from audit in the last few years helped the company to attract talent from other leading professional services firms.

As regards clients that left Arthur Andersen in the recent past, Memani said that the next few months would be crucial because these companies would engage new auditors at their annual general meetings.

"Some, like Wockhardt, have already appointed Ernst & Young. So, the business stays with us," he said.

As regards multinational companies, Memani said that these stuck to the auditor selected by their parents abroad. "Out of the 200-odd clients that have left Arthur Andersen abroad, some 44-45 per cent have come to Ernst & Young," Memani added.

Consulting arm talks

Andersen's consulting business is in talks to join one of the Big Five of the consultancy world in a few days, with clients in tow.

"Talks are on with several entities. Though I will not give a time-frame, the decision will be announced very soon," Ashwin Parekh, head of the practice, told Business Standard. However, he did not disclose the names of the firms with which discussions were being held.

"In countries where Andersen's consulting business has been restructured, the largest number of businesses has gone to Deloitte Touche Tomatsu, followed by Ernst & Young, KPMG and PricewaterhouseCoopers," Parekh said.

Andersen's practice in Australia has joined Ernst & Young. In Hong Kong, China and West Asia, it has joined PricewaterhouseCoopers. Bidding for Andersen's US tax practice has hotted up as well, with PricewaterhouseCoopers dominating the market.

Parekh denied that the partners would lose clients even if the Andersen global practice shifted to one entity and the Indian practice allied itself with another.

"Our success rate in the past with clients in India is high. Several entities which had alliances with other firms outside India worked with us here," he said.

However, sources in the consulting industry maintained that a reorganisation of the client portfolio was inevitable in the light of recent developments and multinational clients would move over to the firm with which their foreign parent had a global tie-up.

The chances of experimenting with local alliances were very low, sources said. This switching of clients will cut across all practices, including tax and audit practices, besides the consulting practice.

"The usual practice of multinational firms is to have common tax firms and auditors the world over and probably it will prevail in India also," sources said.

Andersen's clients in India include the Andhra Pradesh and Haryana state electricity boards, Indian Oil Corporation, Oil and Natural Gas Commission, Castrol, Pfizer, the Industrial Development Bank of India, Bank of Baroda and Bank of India.

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