Strategic Due Diligence : Integration of KPMG Practices in the UK and Germany

KPMG is one of the leading audit and accounting firms globally - the Big Four. Due to the recent regulations and the increasing globalization, the Big Four are required to differentiate. The literature review shows that the largest accounting firms are reasonably similar in terms of operations, size, and market offerings.In June 2006, the management of KPMG in the UK and Germany announced a merger among the two organizations to build a new firm: KPMG Europe LLP. The new firm will be more committed to the European market, increasing awareness of the European market's domestic cultures and knowledge. Through an inorganic growth, KPMG is expected (1) to be able to differentiate among the Big Four, (2) to give its clients a cost advantage, (3) to attract new hires better, and (4) to retain employees.The main motive of horizontal mergers is efficiency gains through economies of scale or increasing market power. One concern with horizontal deals, however, is that they may result in monopolistic behavior or trade restrictions. The merger with a competitor could increase market concentration and increase the likelihood of collusion. This paper deals with both organizations' cultural audits to evaluate the merger between the two organizations. It applies the eminent model for auditing international cultures developed by Garrison (2001). The goal is to extract challenges associated with the cultural divergence of the UK and German practices and the association between the national and corporate cultures.Evidence found in the field research relies on an overwhelming sample size, i.e., 150 responses in the UK and 140 in Germany. The respondents are former employees of KPMG. Data elicits a more materialistic culture in the UK than in Germany. The section of questions on behaviors classifies the UK culture as being more open than the German culture. The author could also isolate a more individualistic national culture in the UK compared to Germany. The UK culture seems to be more commercial; the German culture seems to be borderline. Based upon the Diamond Test (TM), KPMG practices in the UK and Germany seem to have established similar 'cosmopolitan corporate cultures.' The results show that KPMG - as a global network of professional services firm (PSF) - succeeded in developing a unique corporate culture among its member firms both in the UK and Germany. The overall outcomes extracted from the application of Strategic Business Culture Map (TM) also reveal that the merger among the British and German arms of KPMG will help PSFs sustain competitive standing and differentiate through their combined diversified cultures. This was confirmed in qualitative research among five KPMG insiders. The merger between KMPG in the UK and Germany is also expected to enhance the reputation of KPMG. Finally, the combination of the organizations in the UK and Germany is expected to be more than merely an organizational change; it provides only clients and European financial markets with a new professional services firm composed of two distinguishing national cultures within one global company. Overall, the author could not find any evidence that the cultural divergence between the UK and German practices at KPMG may significantly impact the growth strategy of KPMG