Accountancy merger plan is confirmed

Accountants KPMG and Ernst and Young have confirmed plans for a global merger of the two firms, in a move which would create the world's largest accountancy and business advisory firm. A merger must be approved by the US, EU and national competition authorities. A merged operation would have fee income of just under £10 billion sterling. It follows the announcement last month that the Price Waterhouse and Coopers and Lybrand firms were to merge to create a global firm with fee income of £7.5 billion sterling.

But the latest move has been questioned by the international Association of Chartered Certified Accountants. A merger between two of the world's Big Six firms was "unnecessary" and would result in a further reduction in choice for clients, ACCA warned.

"We are worried about the public interest. With the Big Six reduced to the Big Four there will be difficulties for clients and particularly for creditors and for regulators and other carrying out investigators," a spokesman said. In Ireland, a merger would make KPMG/Ernst and Young the undisputed market leader in fee income terms, as long as the merged operation can retain its current level of fee income. A merged firm would have fee income of £70.2 million and 1,324 staff, based on the 1997 Finance magazine survey. If the Price Waterhouse/ Coopers and Lybrand merger and the KPMG/ Ernst and Young mergers go ahead, the current Big Four in the Irish market will become the Big Two. A combined Price Waterhouse/ Coopers and Lybrand operation would have a fee income of £62.3 million, 79 partners and 1,177 employees. At £70.2 million and £62.3 million respectively, the fee income of the merged operations would be significantly ahead of their next nearest rivals - Deloitte and Touche with £25.5 million and Arthur Andersen with £24.5 million.

Staff numbers would not be reduced if a merger is agreed and there would be greater career opportunities for employees, according to the Irish firms. Ernst and Young managing partner Mr John Hogan commented: "Both firms are currently benefiting from the buoyancy of the Irish economy. Together we will provide a broader range of services, combining the knowledge and expertise of our people and making the best use of our shared technology for the benefit of both Irish indigenous and international clients," he said.

Negotiations in Ireland will be led by Mr Jerome Kennedy, who is the managing partner of KPMG and Mr John Hogan.

"The strategic logic of a merger is inescapable," according to Mr Kennedy. Ernst and Young has particular strengths in the high-tech industries while KPMG is the world leader in financial services, he said. "The enhanced financial resources resulting from our combination will allow both firms to invest at a faster pace in new technology and new services for the benefit for all our clients."

Mr Kennedy or Mr Hogan were not available to answer questions yesterday. Their comments came in a joint statement.

At a press conference in London, the international firms admitted their decision had been sparked by last month's announcement from Price Waterhouse and Coopers & Lybrand.

Talks had been going on "in earnest" for two or three weeks, according to the new chairman of the merged operation Mr Colin Sharman.

The merged operation will be headquartered in Amsterdam and have "a strong European influence", bringing together 12,800 partners in 135 countries with predicted world-wide revenues for 1997 of more than $18 billion. Together the two firms have more than 160,000 staff.