KPMG profit shake-up

As KPMG prepared to announce its annual results for the UK, insiders suggested next year’s profits could be shared on a global rather than national basis – one of a rash of changes designed to eliminate divisions within the firm.

Global chairman Colin Sharman is under pressure to act quickly, following this week’s announcement that the merger between Coopers & Lybrand and Price Waterhouse had been cleared by competition authorities in South Africa, Poland and New Zealand.

In the past, KPMG has shared profits on a national basis, but insiders suggested that ‘may have to change’. Alan Reid, head of KPMG consulting, said new arrangements could be put in place ‘to motivate national partners to manage clients to work globally.’

Although an unrestricted international profit share is unlikely, KPMG could use the E&Y model of cost-sharing with cross-border profit sharing where possible.

If any profit sharing is to win approval by the global board in May, profits would have to be comparable in Europe and the US. A spokesman for KPMG US, which announces its results before the UK firm, said fee income rose by 30% over the last seven months, with high profit levels.

In 1996, UK growth was just 6%, with Consulting taking the rap as its revenue declined. Better results are expected to be announced today, with Reid claiming Consulting grew more than 30% in the past year.

Sharman has already announced a raft of changes to shift power from individual practices to a global centre. He would like to have a powerful international chief executive officer, and a ‘vice-president’ whose role would be to promote global account management.

Merger aftermath, pages 10 and 13.

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