Finance: Accountants divided over the maths and motives of merger

Accountancy usually appears a profession for polite and reserved characters. But the row in the profession over proposals to merge three of its six institutes demonstrates all the politeness of a Chicago mobsters' shoot-out.

Representatives of the institutes can barely contain their anger, even a month after the ideas came forward from the Association of Chartered Certified Accountants (Acca). The dispute arose mainly, but not wholly, because Acca made its proposal directly to the memberships of two other bodies, the Chartered Institute of Management Accountants (Cima) and the Chartered Institute of Public Finance and Accountancy (Cipfa). By cutting out the general councils of the other bodies, Acca made a pretty strong hint that it thought the councils were unrepresentative of their members, which was unlikely to win the councils' co-operation.

Michael Foulds, Acca's president, put a different gloss on its tactics, saying the failure of previous merger proposals showed the need to sound out the institutes' members before detailed negotiations began. "The experience of previous initiatives has been of councils' working parties spending days, weeks and months negotiating over detail, which is wheeled out to the members, who then said no," he explained when launching the proposal. "We wanted to do this differently, to get a sense of the memberships' views, before we bury ourselves in the detailed debate."

Acca mailed members of all three institutes asking for reactions. In going direct to members without the support of the other bodies, while telling journalists the move was being undertaken with the co-operation of the other institutes, Acca did nothing to build goodwill. Cima, whose president is Peter Layhe, and Cipfa were given just an hour's notice of Acca's move.

Michael Foulds is now personally in the firing line, facing a members' revolt for authorising pounds 500,000 expenditure to promote the merger. One outsider said that Foulds had an inflated view of his own capabilities, believing himself to be a deal-maker, while really being a partner of a small firm now operating out of his depth. It is noticeable that Acca's chief executive, Anthea Rose, is distancing herself from the political fall-out.

A view gaining support inside the other institutes is that Acca is not sincere in proposing the merger, just cynically improving its public profile to increase its student intake. There is even speculation that Acca's move could drive Cima and Cipfa into their own merger without Acca.

Yet Acca's proposal could still form the basis of a new body. Both Cima and Cipfa have been spurred into their own membership consultations. David Adams, chief executive of Cipfa, says: "I expect our members' response will be that merger is a good idea, but that Acca on its own is not as attractive an option as Acca plus somebody else. Members are saying that rationalisation is a good thing, and don't be too po-faced about Acca's behaviour, even if you don't like the way they have behaved."

With just 13,000 members, Cipfa is under the greatest pressure to support rationalisation. It carried out a major slimming-down operation two years ago to improve its economic performance, but its education and training division is not meeting its student targets.

Delivering Cima into a merger, now, would be much more difficult. It is a growing institute, whose qualification is seen as increasingly relevant. There is even a feeling within Cima that other institutes should be joining it, whereas Acca's proposal is essentially a takeover. But despite tetchy open correspondence with Acca in recent weeks, Cima says it does want to formally meet with Acca to discuss rationalisation.

Acca's finance director, Ross Midgley, says that Cima has misunderstood Acca's proposal, which is open for amendment. "We have to get people around the table. There is a substantial will out there for re-structuring."

For all the criticism of Acca's tactics, Mr Midgley is unrepentant. "We would not have been sitting around the table with a chance of success unless we did what we did," he suggests. "Clearly there have been some ruffled feathers. We are still confident it is achievable. The strong reaction is regrettable, but it was a necessary step. It is about members, and not about council members and their self-interest."

The implication that resistance to Acca's proposals has stemmed from the wish of other institutes' council members to protect their perks and status will do nothing to smooth ruffled feathers, even if it strikes a chord with ordinary members. But it looks at the moment as if the three institutes are going to spend some time, as befits accountants, in arguing about figures.

Acca claims that 63 per cent of Cima members in Acca's ballot want a merger, along with 81 per cent of Cipfa's and 77 per cent of Acca's members. Cima's own ballot, though, found that 86 per cent of its members rejected the merger proposal. Cipfa's consultation takes place next month, but with only about 17 per cent of members of the three bodies responding to Acca's inquiry, there are serious doubts about its legitimacy.

Another weak link in the proposal is Acca's refusal to involve the Institute of Chartered Accountants of England and Wales (ICAEW) in merger discussions. It is likely, though, that having had merger proposals heavily rejected by its membership in the past, the ICAEW believes that members are strongly set against any merger. Certainly, it seems unoffended at being left out. Its spokeswoman said: "We are keeping our heads above all that."