The aborted merger between Ernst & Young and KPMG came as a relief to accountants and consultants in both organisations. But it will send consultancy managers back to their computer screens to model new expansion scenarios.
As with Coopers & Lybrand and Price Waterhouse, the need to globalise operations to capitalise on the rapidly growing demand for consultancy services was a major factor behind the KPMG/E&Y courtship.
Alan Reid, global head of KPMG Management Consulting, explained that in order to attain the desired level of growth, the consultancy would probably need to merge with a partner that was no smaller than half its size, and no more than one and a half times bigger.
Of the five potential partners shortlisted, E&Y offered the best fit both geographically and operationally. ‘E&Y is strong in the US, while KPMG has a higher profile in Europe and Australia.’ said Reid.
‘E&Y is also very strong in the oil and gas industry, while KPMG is the leader in banking and financial services.’
Reid would not reveal the identities of his other four target partners on his list.
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