Failure blamed on regulation

Increasing difficulties with the regulatory process were cited as the main reason for the decision to abandon the merger between Ernst & Young and KPMG.

The demands of Karel Van Miert, the European Commissioner charged with examining the marriage plans of the four firms planning to merge, are understood to have been a particular sticking point.

Combined with the global regulatory demands of scrutiny in the US, Europe, Australia, Switzerland, Canada and Japan, the two drop-outs claimed the process was incurring considerable costs and threatening to disrupt client service.

Uncertainty over the results of regulation, including the possibility of different decisions in different countries, also put paid to the plan.

In Europe, as the table below shows, E&Y/KPMG would have breached the golden 40% rule – holding more than 40% of audit clients in seven European Union countries post-merger, including almost 52% in the Netherlands.

Coopers & Lybrand and Price Waterhouse do not breach the barrier, reaching just 38.6% in Germany and 35.1% in the UK.

Peter Wyman, a Coopers board member, said: ‘Their merger would have created a firm larger than any other player and dominant in Europe.’

[HH] Unify appeals bid.

Related reading