Ernst & Young and Andersen officially merge

Two of Australia's largest accounting firms officially merged on Monday (May 27), creating the nation's second largest professional services firm next to Pricewaterhouse Coopers.

Ernst & Young will formally take over Andersen Australia, which, with more than 50 other Andersen branches worldwide, had to search for a partner after its US parent imploded following the Enron scandal. The firms' combined business is worth around $700 million.

It's expected the combined firm will have about 5000 staff and 300 partners, with around one-third of those partners coming from AndersenAround 100 of those employees are IT staffers, with Ernst & Young absorbing 50 from Andersen.

The task of integrating the firms' IT infrastructure took four weeks of planning up until integration day, Ernst & Young CIO Stephen Arnold told Computerworld. "Talk about birth by fire," Arnold said, calling the project the biggest IT challenge the firm has tackled to date.

Arnold's team of 100 worked from last Friday night to midnight on Sunday (May 26).

Their top priority was to establish a WAN connection between the two firms' IT architectures and implement the right firewalls on those links, Arnold said.

The second priority was to focus on the companies' PC software and re-brand all of Andersen's computers with a consistent Ernst & Young feel.

IT staff upgraded Andersen PCs from Lotus Notes 5.0.4 to Ernst & Young's version, Notes 5.0.5. Ernst & Young will also upgrade Andersen PCs from Windows 95 to Ernst & Young's version, Windows 2000 over the next few months, according to Arnold.

At the backend, IT needed to change all staff log-in IDs across the company's e-mail network. Also, Ernst & Young had to ensure the two firms' server environments were compatible. According to Arnold that was the case with both firms operating Notes and NetWare, but IT still needs to do some work around configuration, he said.

Around 1600 former Andersen staff have relocated to Ernst & Young's Kent St, Sydney premises. The rest are expected to join the parent firm once all integration work is complete around July. Arnold said there was insufficient room at Ernst & Young to accommodate all Andersen Australia employees. The firm needs another four weeks to create additional WAN links between Ernst & Young's interstate offices, Arnold said, adding: "While we're still in two buildings, it creates huge overheads."

"Over time we'll be relocating business units of like areas."

Meanwhile, Ernst & Young last week announced a 10-member leadership team to run the merged company, including two Andersen personnel.

However, five former Andersen partners are eventually expected to join an expanded board of partners.

Former Andersen chief executive Garry Hounsell will be managing partner, markets, and Joseph Carrozzi will be managing partner, tax and law (markets).

Over the next few days, the firms will decide who will lead the combined company's IT group. Ernst & Young's Arnold expects the new firm's IT unit to remain much the same, but with enhancements in "unique" areas like technology development.

Hounsell has said staff were confident that the combined firms would succeed.

Ernst & Young chief executive Brian Schwartz has described the merger as an outstanding opportunity, with ambitious goals.

The competition watchdog, the Australian Competition and Consumer Commission (ACCC), approved the merger earlier this month.

The ACCC said the proposed merger was unlikely to substantially diminish competition, acknowledging that the merger was crucial to Andersen's survival. The ACCC said the merged firm would face effective and vigorous competition from the other major accounting firms as well as smaller global and accountancy firms.

Earlier this month resources giant BHP Billiton dumped Andersen and appointed KPMG and PricewaterhouseCoopers as joint external auditors.

In April Rupert Murdoch's News Corp Ltd also ditched Andersen, taking its $13 million external auditing account to Ernst & Young.

The local Andersen firm had faced criticism for its role in the collapse of HIH Insurance's $5 billion-plus collapse.

Industry regulator, the Australian Securities and Investments Commission (ASIC), has said it would allow Australian firms with Andersen as their auditor to change auditors before the end of the 2001/02 financial year.

However, such a move would only be allowed if the new auditor could conduct the current financial year audit in a timely fashion and there were no conflicts of interest.

Join the newsletter!

Error: Please check your email address.

More about AndersenAustralian Competition and Consumer CommissionAustralian Competition and Consumer CommissionAustralian Securities & Investment CommissionBHP BillitonBHP BillitonEnronErnst & YoungKPMGNewsPricewaterhouseCoopers

Show Comments

Market Place