FDs slam merger ploy

Leading finance directors have hit out at KPMG and Ernst & Young?s ploy of trying to secure European Commission support for their merger by offering to give up self-regulation.

The FDs, represented by the 100 Group of Finance Directors, said KPMG and E&Y?s plans failed to address the main issue of a reduction in choice of auditors for major companies.

Christopher Pearce, FD at Rentokil Initial and chairman of the 100 Group, said: ?Our concerns about the reduced choice and competition for major companies in choosing auditors and in due diligence acquisition remains unchanged.?

This criticism is a stinging blow to KPMG, which this week revealed that it intended to ask the EC to consider introducing ?external, independent regulation of the profession?.

The offering forms a key part of KPMG and E&Y?s joint submission to the EC. The submission, along with a memorandum of understanding, will be filed in the next fortnight. KPMG said the proposal to sacrifice self-regulation recognised that a ?duopoly would be created in some territories and industries that might not be deemed satisfactory?.

But rivals have accused KPMG and E&Y of staging a last-ditch attempt to bypass any demands by the EC for them to shed lucrative audit clients. One senior accountant said: ?We have got to remember what they are fighting for. They want to hang on to FTSE-100 clients by giving up the rights of the profession to self-regulation.?

Chris Swinson, English ICA deputy president and head of the cross-institute working party setting up a new self-regulatory watchdog to police the profession, dismissed suggestions that KPMG and E&Y had damaged his plans.

*KPMG said its tie-up with E&Y was well on course and that it expected to put a merger prospectus to partners in January and to hold the vote in February.

Few dissenters at PW and Coopers Just a couple of partners at Price Waterhouse and Coopers & Lybrand voted against the firms? merger.

The overwhelming ?Yes? vote, which saw every country backing the proposal, was announced on Monday and led to the immediate lodging of 66 boxes containing the merger candidates? submission to the European Commission.

Even German partners, who were expected to provide the merger?s sternest test voted 95% in favour. A PW spokesman said only ?local agreements?, which include personality clashes, still have to be sorted out. The main thrust of the submission centres on the need for a global services provider, with ?quality, not choice? a key reason for approving the plan.