Clients condemn mega-merger plan

Clients, ?nance directors and rival ?rms queued up this week to condemn the planned merger between Coopers & Lybrand and Price Waterhouse as unnecessary.

The two ?rms were accused of uniting to bolster their presence in the lucrative US consulting markets, currently dominated by Andersens, rather than to bene?t clients.

FDs rejected claims by both ?rms that a merger ? creating a mega-?rm with 135,000 employees and revenues of more than #8bn ? would enhance the global accounting services offered to clients. They said there was little extra the Big Six could offer in areas such as audit, tax and insolvency, just by increasing in size.

A spokesman for Coopers admitted a poll of the ?rm?s clients found about 10% objected to its merger plans.

PW client Christopher Pearce, who is FD of Rentokil Initial and head of the FDs? One Hundred Group, said he was worried that competition among a Big Five would be reduced, and prices would rise. ?I don?t believe increasing size brings bene?ts to customers. In fact, it reduces competition and increases the potential for con?icts of interest,? he said.

Another client, which asked not to be named, said the ?rms should instead concentrate on raising the ?variable quality of auditing standards worldwide?.

Richard North, FD at brewer Bass and an E&Y client, said he was already concerned at the lack of choice of accountants on large merger and acquisition deals, and the joint venture ?would only lead to more con?icts of interest?.

Richard Close, head of ?nance at the Post Of?ce, feared the move would spur other mergers and leave big ?rms facing an oligopoly. Close uses both Coopers and PW as consultants on the massive change management project. Colin Sharman, head of rival ?rm KPMG, said the move was driven by the weakness of PW in the US. ?We don?t see any pressure from the clients or the market for this merger,? he said.

But rivals pointed to the hurdles before the deal is sealed. Over two-thirds of PW partners must vote for the merger before negotiations can proceed, while Coopers needs to overcome a 75% threshold.

PW partners, who rejected Andersens and Deloitte Haskins & Sells as suitors in the last decade are known to be unhappy with the differential in partner income with Coopers ? $100,000 in the US. PW partners in the UK are said to be concerned they will lose out in the jockeying for position that will follow the merger.