PracticeConsultingKPMG expects backlash

KPMG expects backlash

E&Y rejection of merger blamed on escalating cost and regulation. Jon Bunn reports.

Disgruntled partners at KPMG expect a ‘rank and file’ backlash after Ernst & Young pulled the plug on the proposed merger between the two firms.

KPMG partners who contacted Accountancy Age after the merger collapsed on Friday warned E&Y had gained access to previously confidential information after details of operations and products were shared by the negotiations teams.

Mike Rake, KPMG’s chief operating officer, dismissed the claims as the grumblings of a ‘tiny minority’. He admitted it was E&Y’s decision to get out, but said it was better to call it off at a relatively early stage.

A KPMG partner, who asked not to be named, said most UK partners spent last weekend celebrating the merger’s downfall. He said the collapse of talks – blamed officially on escalating global regulatory problems, cost and disruption to clients – followed ‘endless bickering’ between negotiators.

‘Many partners are already asking whether the management that dragged us down this route unwillingly are the right people to take this firm forward,’ the partner said.

Rake, who said the merger had provided an opportunity for useful self-analysis, countered: ‘Merging was an international decision that started in the US. We joined to do our best and try to make it successful.

‘There was early enthusiasm and recognition of the opportunities the merger could have given us. But, for a lot of our UK clients and partners, there was little short-term benefit.’

Rake, who said KPMG’s US firm was disappointed by the failure, added: ‘UK partners now want fast and effective leadership to get back on track to our plan agreed in San Francisco last October.’

The jitters at KPMG came as Price Waterhouse and Coopers & Lybrand admitted they were encountering a culture clash between the two firms. Peter Wyman, a Coopers board member, said: ‘There are two culture clashes – between Coopers and PW and between Europe and the US. There are bound to be differences, it’s not anything we had not anticipated.’

See editorial comment When two into one doesn’t go

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