A merger has been on our mind for some time now. Over two years ago MSD & Co., Arthur Andersen's representative office in Malta, had discussions with Ernst & Young on the possibility of a merger in Malta.

This fitted well with the ideas and plans of MSD & Co., and this compatibility of minds led to the present merger being concluded.

Ernst & Young in Malta started off in a humble way with 30 people. The Malta office of Ernst & Young eventually become a full member of the international auditing firm on July 1, 2000, after serving as a technical assistance firm to Ernst & Young, although membership had always been the intention.

We now employ 70 people. There is still a lot of catching up to do to conform with a position befitting the Ernst & Young name.

MSD had the ambition of becoming one of the top four auditing firms in Malta. We, on the other hand, already held a top four position. We always wanted a better positioning in the Maltese market. The merger got both of us there.

60 mergers

What is happening in Malta is not an isolated exercise. There has been merger activity between Ernst & Young and Andersen in 60 out of the 80 countries in which it operates.

MSD in Malta had discussions with a number of other firms but at the end of the day it decided to merge with Ernst & Young. There was good compatibility between both organisations and their businesses.

Considering they had been around for only two years, Andersen could offer Ernst & Young considerable strengths as an organisation. Ernst & Young even sent a global partner from overseas to Malta to oversee the merger plans. Nothing was left to chance.

The combination of MSD & Co. with Ernst & Young in Malta will result in a truly leading firm on the island. We are combining our key qualities and strengths.

There are instances where we are using Andersen's methodologies. On other occasions we resort to Ernst & Young methodologies. When it comes to assurances or auditing, the new company is still adopting the regular Ernst & Young way.

Common ground

Both Ernst & Young and Andersen had much in common with regard to work methods but they did differ remarkably in two aspects.

Andersen was completely motivated by profit. In terms of proposals Andersen was much more aggressive than Ernst & Young. Adopting too modest an approach as we do is wrong but so is being overtly aggressive.

Andersen needed to tone down their approach and become more sensitive, whereas Ernst & Young must learn to be more forthcoming about its capabilities.

We firmly believe that with our new strengths and addressing the weaknesses of the new operation would be a force to be reckoned with in the home market.

It isn't easy to achieve a truly integrated company from the two parts and there are few combinations that are 100 per cent successful in all respects.

Fortunately Ernst & Young people have been trained to overcome cultural and psychological difficulties. That is why we are confident this merger will be one of the most successful.

Ill-timed merger

As far as we are concerned, the announcement of the merger was not ill-timed, given what has been happening in the US, especially insofar as Arthur Andersen is involved in the Enron and Worldcom scandals.

In fact, lines of communication on the merger were already open, even before the Enron affair started. Indeed, we think the chain of events in the Enron saga helped us in a way since they accelerated the process.

In any case, what is happening in Malta is a reflection of what has happened all over the world, where former Andersen people have joined Ernst & Young. Andersen enjoyed a very high reputation and what happened at Enron has served as an eye-opener.

Many accountancy firms grabbed the opportunity to come together and join a leading professional service provider with the recent lessons very much in mind.

The accountancy profession is here to stay and rather than speaking of an ill-timed move we must consider this merger or, better still, this new cluster of services as a sign of the profession's determination to move into the future with confidence. The profession is now on its way to restoring investor trust.

Brand strength

What we wanted to achieve was a brand name, which is easily recognisable and which people can associate with a real service. Without such a brand name one cannot really operate in Malta.

If a firm wants to operate in corporate finance, whether it is consultancy services, major clients' audit or international tax business, one needs a name to help tap into that expertise.

As a combined force, we are strong in what Andersen used to define as consulting and what to Ernst & Young is corporate finance. This combination should give the company more strength in the area of international tax.

As a young firm, Ernst & Young was still building up its areas of specialisation. We're still in the process of taking on more tools and areas of expertise imported from Ernst & Young abroad.

Ernst & Young was employing people and offering training in various specialisations from a technical viewpoint. Ernst & Young in Malta was more of a general practitioner.

Ernst & Young had invested in the development of people as a resource as well as in technology and we made such an investment up-front to prepare ourselves for bigger things.

Strength in people

One of the company's main strengths is its people. We invest in people and a major effort was made to ensure that the passage of people to Ernst & Young would be a real worthwhile event in their lives.

In fact, one of Ernst & Young's strengths was staff secondment - sending staff to Ernst & Young offices abroad to get the feel of Ernst & Young procedures, methodologies and corporate cultures.

Worldwide, Ernst & Young is one of the big four auditing firms. In Malta it was ranked fifth or sixth. The merger has put the newly merged firm among the top four.

The company still has ambitions. This is a solid base on which to build the future of the new company.

The combined operation now includes ten partners and just over a hundred staff. The company has offices in both Sliema and Valletta.

The audit departments were combined and housed in Sliema and the tax and corporate finance departments are now operating from Valletta.

Full global integration

This must be the only firm on the island to be fully integrated in a globalisation exercise in that it forms part of the global firm. We are not a representative office as a franchise.

Indeed, it was our choice to become part and parcel of the global firm of which we are full members. As the business itself changes we need to evolve.

In the past the business consisted almost entirely of audit with some management accounting thrown in, even if this was a loss-making operation. Nowadays, audit barely represents a third of a firm's operations.

Hence, the need to employ people having different specialisations and even coming from different professions. Today the market is much more interesting but it is much more competitive.

The future

As for the future of Ernst & Young in Malta, watch out for the positioning that the firm will be taking, its presence on the market and the confirmation of the success of this newly merged company because this is only the beginning.

We will be striving to make Ernst & Young a name that is first and foremost readily recognisable as a professional auditing and accounting firm with a name that is synonymous with efficient service, objectivity and value for money.

We think Ernst & Young's tagline "From thought to finish" now seems to take on an even greater significance.