Price Waterhouse is ready to step in after Arthur Andersen's last minute withdrawal from an alliance with Wilde Sapte.

The accountancy firm is understood to still be interested in Wilde Sapte after approaching it last year. At the time Wilde Sapte was deep in its talks with Andersens.

Paul Downing, head of PW's European legal network, would only say Wilde Sapte management “had put together a strategy which everyone had bought into. It's a great shame that at the end of the day, for reasons unknown, they couldn't pull it off. I don't believe that strategy was wrong”.

Any deal PW may do will have to gain approval from prospective merger partner Coopers & Lybrand.

Wilde Sapte managing partner Steve Blakeley said it would be “inappropriate” to make any comment on offers from other firms. “We have to draw our breath first,” he added.

Meanwhile Ernst & Young and KPMG, whose own merger talks failed, are pushing ahead with separate law firm acquisition plans.

Rumours are growing that Ernst & Young is in talks with Lawrence Graham and Denton Hall, where E&Y's legal consultant Andrew Daws used to be on the board. Daws is friendly with Lawrence Graham's managing partner Bill Richards.

Daws would not comment on the rumours, but said one way to achieve a substantial legal arm was to bring two smaller law firms together.

He added that the collapse of the Wilde Sapte deal “oughtn't to affect E&Y's plans”. E&Y was offering a single tier of equity, unlike Andersens' “harder to sell” two-tier structure. Neither Denton Hall nor Lawrence Graham would comment.

Stephenson Harwood has publicly said that it was likely to enter into a merger before the end of the year, and that an accountancy firm is a possibility.

Its client KPMG is a likely target, but KPMG refused to comment and a Stephensons spokeswoman said that talk of a KPMG deal was “complete nonsense”.

See analysis, page 2