Andersens talks put PW's legal arm on merger alert. John Malpas reports from New Delhi

Chris Arnheim, the founding partner of Price Waterhouse-tied Arnheim & Co, has admitted that a merger between rival Arthur Andersen and a major City firm might force his own firm to follow suit.

He told an International Bar Association (IBA) meeting on MDPs last Thursday that his own firm would have to re-think its strategy of gradual growth if Andersens made a major move in the City.

Referring to recent reports in The Lawyer that Andersens is in talks with Simmons & Simmons, he said: "I'm comfortable with the firm's policy of organic growth, but if Andersens was to merge with a major City firm that would change everything. Then we'd have to ask ourselves whether our strategy was appropriate."

Arnheim was at the IBA to tell its suspicious delegates why the Big Six accountancy firms were muscling in on the legal market.

He said the world legal market was far too fragmented for the liking of multinational clients. He said they not only required all their legal advice to be delivered across the world in a package, but they wanted the same firm to provide all other professional advice as well.

And he said accountancy firms resented the fact that lawyers took the lion's share of professional fees from clients acting on advice which had originally been provided by accountants.

During the meeting he was quizzed about his firm's relationship with Price Waterhouse. He said there was no profit sharing between the two firms, they had no contract and his firm would even be prepared to sue Price Waterhouse if a valued client asked it to.

He added that, in its first year, the firm had received 70 per cent of its income from non-Price Waterhouse work, although that figure had decreased in the second year. The work had been generated by new recruits who had taken existing clients to the firm.