FOCUS: FINANCIAL PR - When bigger is really better/Two planned mergers among the biggest six accountancy firms have raised resistance to a new era of mega mergers. IAN DARBY reports

When four of the ’big six’ accountancy and management consultancy firms recently announced their merger plans they knew that they faced a huge communications task as their own employees and the world’s media seized on the implications. Coopers and Lybrand and Price Waterhouse, the first of the four to announce their merger, and KPMG and Ernst and Young have all identified PR as a key part of their plans to merge.

When four of the ’big six’ accountancy and management consultancy

firms recently announced their merger plans they knew that they faced a

huge communications task as their own employees and the world’s media

seized on the implications. Coopers and Lybrand and Price Waterhouse,

the first of the four to announce their merger, and KPMG and Ernst and

Young have all identified PR as a key part of their plans to merge.

Perhaps most obviously they are trying to address the objections of some

sections of the media, their own clients and partners such as concerns

over reduced competition and job losses. Though the recently proposed

merger between Swiss banks UBS and SBC has eased concerns over global

mergers, there is still a large and varied PR task for the four

accountancy firms planning similar moves.

Business benefits for the four companies are clear. They will create

economies of scale in sectors that are seeing a constant erosion of


For instance, Coopers and Price Waterhouse have predicted their business

will grow at 20 per cent a year and create 50,000 jobs over the next five

years. This will help to fuel expansion into eastern Europe and the former

Soviet Union.

It is these positive facets of the proposed mergers that the involved

firms have attempted to highlight as part of their communications


Importantly, there is a big internal relations task in terms of convincing

partners of the worth of the mergers.

Media relations across national boundaries is an intricate business

because of the global nature of the deals, and lobbying has become vital

following the announcement that the European Competition Commission is to

investigate the proposed deals.

Jeremy Wyatt, director of corporate communications at Price Waterhouse

Europe, says: ’The external media work involved is very different to that

which supports a quoted company.’ For these firms, with their partnership

structures, are not using the media to address shareholders and


However, the diversity of global media attitudes to the mergers remain

vitally important. Wyatt says: ’The anti-competition issue has surfaced in

the UK. Together with Coopers, we’d service just under 50 per cent of FTSE

companies so that’s what has driven finance directors to say that they’ll

get less choice. What we’re trying to say is look at it globally.’

Price Waterhouse’s PR for the merger is handled primarily in-house. Wyatt

oversees communications across Europe, with Sam Jaffa, formally of the

BBC, spearheading the press function in the UK. Coopers has taken a

different approach. It has a strong in-house team, but has also used

retained agency Citigate to help on the merger.

Bridget Juniper, head of corporate PR at Coopers and Lybrand, says:

’Citigate had a good knowledge of us through their work with our corporate

finance division and have a great deal of experience from past mergers

It’s good to have some outside views because you become entrenched in your

own ideas otherwise.’

Citigate also provides the practical solution to the sheer volume of work

created by the merger announcement. Juniper estimates that the

communications workload has doubled since the merger was made public.

This task also involves internal communications. Price Waterhouse’s and

Coopers’ 8,500 worldwide partners have already voted, on a global level,

on the proposed merger. They are expected to approve, but the

communications task of distributing information and voting papers is a

large one.

The Ernst and Young and KPMG merger was announced some weeks after the

Coopers/Price Waterhouse plans. Tim Roberts, director of media relations

at KPMG, says: ’The merger between Coopers and Price Waterhouse was

announced prior to our own and had been clearly planned. The KPMG/Ernst

and Young announcement was accelerated by this deal. We had less time to

prepare than the other parties. Also, by this time the media here had

decided they didn’t like big mergers.’

Roberts emphasises that communications is handled as a joint effort across

KPMG and Ernst and Young. ’The communications task is difficult because it

is global. There’s no such thing as a global journal and we operate in 150

countries around the world. The reasons for the merger are just as

important in Kazakhstan, Szechwan and Indonesia as they are in Belgium,

the UK and the US.’

Roberts says he is focusing on communicating the global benefits of the

merger through the press: ’The merger makes sense in global terms. We

don’t have enough money to invest in Russia and China,’ he says.

He also agrees with Wyatt that the anti-competition issue has been more of

a PR problem in the UK than anywhere else: ’In the UK there is a tradition

of looking at the competition issue very closely. In Greece, let’s say,

it’s not a huge issue. Most European countries want their companies to be

as large as possible.’

This may be because many multinationals are listed in London and finance

directors have a larger voice. But it may also be the result of a uniquely

British insecurity when faced with the prospect of change and large-scale


However, the competition issue cannot be dismissed. The European

Commission is now involved and all the companies have been asked to submit

reports to the European Competition Commission. The four firms are taking

a similar approach to this by stressing the number of jobs the mergers

would potentially create.

There are signs that the communications effort by the four is changing

opinion. Simon Brocklebank-Fowler, managing director of Citigate

Corporate, says: ’Two themes are evolving. One is that this merger is not

about the UK audit divisions. While 40 per cent of the new group fee would

be from audit there are fast growing parts outside this.

It will make Coopers & Lybrand highly competitive in management

consultancy and niche corporate finance activity such as


He adds: ’The second theme is that this merger is very good for


The major management consultancies, such as McInsey and Cap Gemini, are

predominantly US-based.’

It is likely that ten of the new Coopers/Price Waterhouse top management

team will be European. This will result in a firm with a dominant European

culture, something which Coopers has attempted to communicate.

Brocklebank-Fowler believes the communications task is being fulfilled:

’The UK press has focused on the regulatory debate because it’s been easy

for them. But we’ve begun to see a shift in the last months as we focus on

the other issues.’

Juniper agrees. She says that in the UK and across Europe Coopers has

developed a communications strategy centred on talking to journalists

individually. ’We’re picking off the press one by one,’ she says. ’Once

they’ve analysed the arguments involved, many of their original concerns

don’t hold water.’

Roberts works on key media issues and liaises at least once a week with

Ernst and Young’s team. Neil Sherlock, KPMG’s director of internal

relations handles internal issues such as getting information out to

partners and other employees.

Claire Gilbert, Ernst and Young’s media relations manager, says: ’We have

a panel of communications experts which is fully integrated with KPMG.

This contains communications representatives from in-house offices, and

staff and client relations people.’

This panel reports directly into Ernst and Young’s senior UK partner, Nick

Land, and KPMG’s UK chief operating officer, Mike Rake. ’Our

communications strategy is constantly evolving,’ says Gilbert.

’We’re currently working on a submission to the EU and there is an ongoing

pattern of events on which to focus communications.’ The next of these

events is the impending vote by the two firms’ US partners.

KPMG works mostly in-house, but like Coopers it is using some external

advice. Sir Tim Bell has been advising its senior UK partners separately

from the communications working party: ’KPMG has an ongoing relationship

with Tim Bell. He works with the senior partners on possible future names

for the merged group and its brand positioning,’ says Roberts.

This provides some insight into how the communications task may


As time goes on, the PR task is likely to shift toward communicating brand

positioning and the relative strengths of the groups and their

management structures. For now, however, they are focusing upon pushing

through the mergers themselves.


The Financial Services Authority, the new City ’super-regulator’, is set

to become operational this spring. It will work with the Bank of England

to sustain confidence in the UK financial services industry, protect

consumers by ensuring firms are competent and reputable, promote public

understanding of the risks and benefits of financial products, and

monitor and detect financial crime.

It is a broad remit considering that the FSA also has a huge internal

communications task ahead as nine regulatory bodies are brought together

under one roof. The man charged with orchestrating the FSA’s internal and

external communications effort is Philip Robinson, currently chief

operating officer at IMRO, the investment management regulator which is to

become part of the FSA.

Robinson is to become its director of communications and corporate


He says: ’Our job is not just after the event explaining. We have to have

a clear view internally of what the issues are and relate this to our role

externally.’ The FSA’s initial focus will be on internal communications

and it is in the process of appointing a head of internal communications,

responsible for a wide programme going far beyond the usual staff

newsletter. It will attempt to educate members of staff on how their roles

have changed in light of the new regulatory structure, a potentially

massive job given that it will employ around 2,000 people.

While it is true that the press offices of the regulatory bodies will be

rolled together, it is unlikely that job losses will occur due to the

sheer weight of work in the first two years of the FSA’s existence.

Also, the Bank of England and the Personal Investment Authority will

retain their centralised public affairs resources separate to the FSA.

Observers are watching with interest to see the style of communications

adopted by Robinson. While all regulatory bodies are subject to

constraints - they mustn’t divulge privileged or confidential

information - some are more open than others.

So is the PR style of the new body likely to be open and proactive?

Robinson hopes so: ’It’s my policy to be as open as possible,’ he


This view is endorsed by financial PR people. Henry Gewanter, managing

director of Positive Profile, says: ’Philip Robinson as an individual is a

good choice both for his personal outlook and the IMRO ethos which is to

be honest and open.’ Gewanter adds that Robinson will be able to draw on

the experience of Judy Delaforce, IMRO’s current head of PR.

One financial PR figure expressed relief at the appointment: ’Basically

regulators spend a lot of time suppressing the truth. The SIB has been

terrible in this respect and it would have been awful had it got control

of the communications function at the FSA.’ The signs seem good for a

period of structured and open communications at the FSA.


Since its inception in 1995, the Committee on Corporate Governance has

striven to establish a code to ensure companies always serve and protect

its investors’ interests.

The subsequent Cadbury and Greenbury Committees identified a number of key

areas to be addressed to facilitate a workable code, and another committee

was founded to review the implementation of these. Chaired by Sir Ronnie

Hampel, it is due to publish a final report in late January.

John Healey, Secretary of the Hampel Committee, says he ’cannot anticipate

what the report will bring,’ and adds that respective parties, ’will just

have to wait and see.’ But he says that all submitted responses to the

preliminary Hampel report, published in August this year, have been given

due consideration.

The report’s remit is to promote high standards of corporate governance,

to protect the interests of investors and to establish recommendations for

the involvement of shareholders in a company’s business.

One certainty, according to Graham Williams, secretary of the Investor

Relations Society, is that ’corporate governance is here to stay’ and, as

such, more accountability at all levels comes into effect.

The discipline of investor relations (IR) was conceived as the interface

between a company and its investors and to facilitate accountability at

all levels to the investment base.

In its response to the preliminary Hampel Report, the Investor Relations

Society recommended the Committee include a reference to the management of

corporate governance.

Whether the Committee acts on those recommendations, Williams argues that

by simply raising the profile of corporate governance, the role of IR also

rises. He adds that it is already more valued by companies.

’Big institutions like Standard Life and Hermes have already appointed

people as IR (specialists),’ he says. ’Most companies accept that

corporate governance is here to stay so it’s much more productive to have

someone trained in this area rather than having managers use their


With this perceived growth will come even higher standards for IR, says

Williams, who argues there may eventually be a need for professional exams

for executives working in some of the more complex sectors of the


To supplement this, further training courses may be offered through the

Investor Relations Society and perhaps through companies themselves.

Other areas of potential re-education lie in the area of technology.

The Investor Relations Society has already suggested that technology

should be used in due course to allow all investors to participate in AGMs

from their homes, which Williams says will present another challenge for


Keith Williams, director of Interface, which provides independent investor

relation services to a broad spectrum of businesses, agrees that the role

of investor relations is set for new horizons. He argues that the

establishment of a workable code will take companies out of the ’box

ticker syndrome’ that has sometimes existed.

’The creation of principles alone is not enough to prevent box-ticking,’

he says, ’the final report should incorporate an adequate framework of

compliance that can be monitored.’

With greater transparency at all levels, Williams says the brief of all IR

pracitioners, especially the independents, will become more extensive.

’The skills of investor relations are quiet varied already, but they may

need to provide other areas of expertise, perhaps at consultancy level and

even greater research services,’ he says.

Tony Hollingworth, director of investor relations at Lowe Bell Financial,

agrees and adds that another off-shoot of the Hampel Report will be

greater definition of the role of the in-house executive and that of the

retained investor relations agency.

’The brief of the investor relations (manager) remains the same,’ he says.

’But agencies may find themselves called upon to provide a completely

objective summary of company accounts, which an in-house executive may not

always be perceived to do.’ Another argument for greater dependency on

external expertise is the huge contact base that it immediately provides,

thereby allowing companies to bring their achievements in the whole sphere

of corporate governance to a greater audience.

’Of course all companies will want to show a policy of good corporate

governance and the more people that know about it the better,’ he


’But looking to outside expertise won’t distract from the work of the

in-house executive whose understanding of the intricacies of a company

is far greater. The skills are mutually complementary.’

Tim Melville Ross, director general of the Institute of Directors, is

hopeful that Hampel will provide more guidance in the area of long-term

incentive plans, so that boards are much more aware of what constitutes

acceptable and challenging performance criteria.

’The preliminary report has made a genuine case for good governance in all

companies, whatever the size,’ he said, ’complex decisions have to be made

to run a company and it is important that investors know how these

decisions come about.’ David Gould, manager of investor relations with the

National Association of Pension Funds, says that the provision of a

consolidated code will make the whole area of communication easier. ’With

the criteria of corporate governance clearly defined, it will be easier to

explain a company’s actions to shareholders and the press,’ he says.

Jackie Rodgers.

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