Andersen Tax eyes expansion into Asia, Australia
Andersen Tax has been spreading its network of tax and legal services firms across the world after settling a legal dispute last year with a French firm that had laid claim to the Arthur Andersen name.
Last year, the two firms engaged in a series of lawsuits in Europe, the U.S., India and other parts of the world, both claiming the rights to the Arthur Andersen brand. Andersen, one of the largest global accounting firms, collapsed in the wake of the Enron and WorldCom scandals of the early 2000s. However, former Andersen partner Mark Vorsatz and a group of 22 other former Andersen partners founded WTAS (short for Wealth and Tax Advisory Services USA Inc.) in 2002. As CEO, Vorsatz later renamed the firm as Andersen Tax in 2014 after acquiring the trademarks and copyrights from Arthur Andersen LLP and Andersen Worldwide (see WTAS revives Arthur Andersen name as Andersen Tax). He expanded the firm to 58 locations in various countries, mainly the U.S., Europe and Latin America.
Last year, though, a French businessman claimed he had reconstituted Arthur Andersen and established 26 offices in 16 countries (see Firms vie over rights to Arthur Andersen name). Many of the locations, however, turned out to be merely phone numbers, and Andersen Tax managed to prevail in a number of legal battles in the U.S., India, Brazil and other jurisdictions against the French company (see Brazilian firm agrees to stop using Arthur Andersen name). The dispute was eventually resolved, although Vorsatz occasionally hears about new scammers trying to lay claim to the Arthur Andersen name. Meanwhile he is continuing to build Andersen Tax, while also branching out into legal services in many countries outside the U.S. under the Andersen Global name.
“In terms of our geographic buildout, we now have 92 locations,” he told Accounting Today last month. “Since July of 2013, or a little under five years, we have added 82 offices and we are now in 35 countries. We have legal services in 25 countries. If you look at pure geographic coverage for legal services, that would put us in the top 20 firms for geographic coverage.”
Last year, Andersen launched practices in both the Middle East and Africa. “In the Middle East, we now have locations in Egypt, Lebanon, Saudi Arabia and Dubai,” said Vorsatz. “In Africa, we now have two locations in Nigeria, Kenya, Uganda and Tanzania. We expect that we’re going to add quite a bit in Africa. I have a trip in about three weeks to the Middle East where I’m going to Jordan and Qatar, and I’m also meeting for another round of conversations with a firm in Kuwait. I think probably in the next 12 months or so we’ll have finished our buildout in the Middle East. We probably have about another two years [for the buildout] in Africa, but that would encompass somewhere around 16 or 18 countries.”
He has scheduled trips for later this year to Angola, Mozambique, Congo, Ethiopia, Ghana, Ivory Coast, Senegal and Cameroun. “We’ve completed our evaluations of each of those markets, and we’re in the process of getting meetings set up,” he said.
Andersen is also expanding in Latin America. “We just signed a deal in Buenos Aires so we now have a practice in Argentina,” said Vorsatz in mid-March. “I’m pretty optimistic that we’ll have something in Peru by the end of the month. For South America the only holes we’ll have other than depth and breadth will be in Bolivia, Paraguay and Colombia.”
He doesn’t plan on expanding to Venezuela for now because of the collapsing economy there. However, he has scheduled trips to both Bolivia and Paraguay in early June. “We’ve completed our evaluation of that market,” he said. "I’ve got six meetings scheduled in Paraguay and five in Bolivia. We’re working on a trip to Colombia in August, so I feel pretty optimistic that we’ll have the basic geographic areas covered by the end of this calendar year in South America. We still have some holes to fill in Central America. We presently have both legal and tax in Mexico and Guatemala. We have legal in Panama, but we’re looking at countries like Costa Rica, Nicaragua and El Salvador. That will probably be next year.”
Andersen has also been expanding in Europe. “We just announced our first group in London,” said Vorsatz. “We expect to announce another group, I think, on April 12. We tend to stagger our announcements. We have announcements going out through early June on deals we’ve already done. And we’ve expanded quite rapidly in Germany. We had a single practice in Dusseldorf. Since June of last year, we’ve added small practices in Cologne, Frankfurt, Leipzig and Berlin, and we’re actually working on a deal currently in Munich. My expectation is we’ll continue to ramp the way we have. Probably we’ve done seven deals so far this year. We could have nine by the end of [March]. We’ll probably have 20 to 25 locations this year, and we hope to continue that trend for the foreseeable future, until we complete our buildout.”
The firm has also been looking at expansion in Croatia and Portugal. “We’ve got another group that’s going to merge in Lisbon, but we just added a location in Porto on the coast,” said Vorsatz. “We’re going to continue to build out a platform that would look very similar to a Big Four.”
Expansion in Asia and Australia will come next. “We’re going to start looking at Asia, which is the only region where we haven’t done anything,” said Vorsatz. “We’ll probably do the first round of conversations in the first quarter in a couple of countries. We’ve finished our evaluation of Australia. I finished my evaluation of China, but we need to do a lot more due diligence on it. We’ve narrowed it to about 45 firms.”
The firm has grown rapidly in recent years, going from 245 partners at the end of 2016 to more than 400 today. “I would expect realistically we’ll be at 525 to 550 by the end of this year,” said Vorsatz. “A big group we will likely add an affiliation with will be in India. I’ve been to India four times and over a period of about two and a half years, we’ve narrowed it to two firms, and they’re coming to our partner meeting in Chicago in May. We’ll make a decision in May. Both firms are interested, but either of those firms will give us four more locations, and somewhere around 200 people with probably a couple dozen partners, so that will probably be the second or third biggest practice outside the U.S.”
One area where he doesn’t want to expand, though, is to revive Arthur Andersen’s old audit practice, which led to the problems with Enron and WorldCom back in the early 2000s.
“You probably have seen recently some articles in the U.K. about the possibility of forcing the Big Four practices to separate audit out because of regulatory issues,” said Vorsatz. “In Europe they have audit firm rotation now, and in the Netherlands they not only have audit firm rotation but you can’t do any tax work for a public audit client. In Ecuador today you can’t have the same firm doing audit and tax work. South Africa is going to audit firm rotation. It’s already built into the law. There’s just a phase-in period.”
He anticipates U.S. firms may eventually separate out their audit practices from their consulting practices. One reason may be because of the market for legal services. One area where Andersen has been expanding is in legal services, as some of the Big Four have been making moves to do lately too.
“EY now has an affiliated practice in Silicon Valley and New York, and PricewaterhouseCoopers in Washington,” said Vorsatz. “These are fairly recent developments. I think they will be the first of many because we see the Big Four expanding in legal outside the U.S. They obviously have constraints on their practice because of independence issues. In many countries the scope of their practice in legal is fairly narrow, and the conflict issues are much more complicated because of the audit independence issues. I think that’s another reason down the road why the firms may reevaluate how they’re structured and what role audit plays in that.”
Andersen has chosen to focus on tax only in the U.S., and tax and legal outside the U.S. “There are areas in the general legal area that fold in very well, like mergers and acquisitions, general commercial, real estate, intellectual property and employment law,” said Vorsatz. “Those areas are very compatible with our tax business.”
Many of the firm’s legal services outside the U.S. deal with intellectual property and employment law.
“The employment law area in Europe is a very big practice,” said Vorsatz. “It’s an important practice in Latin America, where you represent companies on employment matters. Those often have some tax implications, but in many countries we do general corporate representation on employment matters, and we also handle the litigation on behalf of the company in that regard.”
He contrasts the way his firm is structured internationally with the Big Four networks, dating back to the days of the original Arthur Andersen. “The Big Four is more like a confederation,” said Vorsatz. “At Arthur Andersen, we split profits globally. We are moving in that direction. We’re also going to global financial reporting. The other firms don’t share profits or financial information. I always joke with people that at Arthur Andersen we truly were one firm. We all went out of business together. But these other firms, in my view, are what I would call confederations because they don’t share any profits. From what I can discern from talking to people in the firms, they don’t share financial information. Even in our current form, with our collaborating firms, we’re sharing financial information with everybody and we’re going to a global financial reporting structure. It’s going to take us probably four to five years to fully implement, and there are other firms that are doing similar things on the legal side. There is quite a differentiation between what we’re doing and what the other firms are doing. As I often say to the firms and individual partners I talk to, I’m not going to try to persuade you that what we’re doing is better than everyone else, but I will tell you for sure that what we’re doing is different than anyone else.”