"Rogue" Partners At KPMG Christchurch

Here in the US, we are accustomed to the concept of a national practice  for our Big 4 firms.  Although each of the local offices, in each city, in each state has a Managing Partner and local partners, the firms are rarely separate legal entities.  A partner is a partner of the National firm, not of the local Chicago office, for example, for legal purposes.

Not so in many foreign countries.  As the chaos in Christchurch, New Zealand demonstrates, in many countries outside the US, the Big 4 offices in a particular country are often a loose confederation of individual partnerships operating under a national banner and then, in turn, under the global firm brand banner.  
Another reminder of this situation was the recent “merger” of the Irish EY offices, where the partners recently voted for an all-Ireland integration.
Can anyone keep a straight face whilst calling these firms “global networks,” let alone calling them true global firms?

From The Press in New Zealand:

Accounting confusion

Ernst & Young is thought to have driven the merger with rival Christchurch accountancy firm KPMG in a bid to build itself up in the local market.

There are rumours KPMG’s five partners were offered an incentive of $100,000 each to jump ship, but BusinessDay was unable to confirm this with Ernst & Young New Zealand, which refused to talk yesterday.

KPMG’s five Christchurch partners, Bruce Gemmell, Paige Cuthbert, Carey Wood, Spencer Smith and Bruce Loader, left the firm last week to join rival Ernst & Young, sparking a battle for staff and clients.

The move has created confusion for clients and uncertainty for KPMG’s 80 staff who have until 5pm today to decide who they want to work for.

KPMG staff were locked out of their offices on Monday last week and told to go to a local hotel for breakfast where it was revealed to them KPMG was being “integrated” with Ernst & Young.

KPMG moved quickly, sending staff from other parts of the country in to salvage the business and appointing a new managing partner.

KPMG has offered other staff between $5000 and $15,000 to stay with the practice, which is operating from temporary offices in Christchurch while legalities over the lease of its Cranmer Square building is sorted out.

KPMG was not talking yesterday.

BusinessDay was told Ernst & Young’s Christchurch senior partner, John Hodge, was on annual leave and was referred to its New Zealand chief executive, Rob McLeod, who refused to talk to BusinessDay. Gemmell could not be reached for comment and the other four partners would not comment.

Last week, Hodge said the merger fitted the firm’s regional investment strategy to position itself as the leading provider of professional advisory services.

This week Gemmell said the move made good business sense and would bring together nine partners and 150 staff.

Industry insiders say Ernst & Young has an aggressive growth strategy and wanted to show it had some clout following the loss of three partners last year and corporate advisory staff.

There have been accusations of unprofessional conduct and client poaching and both firms have sent letters to clients this week to sure up support.

Gemmell and partners on Wednesday wrote to “clients and friends” under Ernst & Young letterhead to update them on “how the transition is going”.

KPMG chairwoman Jan Dawson also wrote to clients to tell them it has not agreed to integrate or merge any part of its practice with Ernst & Young. She asked clients not to transfer their existing engagement contract to Ernst & Young.

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  1. […] or PwC. In some countries, New Zealand for example, there may be many firms operating under the KPMG New Zealand umbrella but they are no more aligned financially or strategically than Christchurch is with Tokyo. […]

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