If it wins approval from regulators and the two existing firms' 8,500 partners, the combined firm - as yet unnamed - will overhaul Andersen Worldwide, which last year reported its 100,000 employees had achieved revenues of $9.5bn, as the largest professional services firm in the world. In the UK, it would be comfortably the biggest firm, claiming about 50 per cent of FTSE 100 companies as audit clients.
The plans - which could take several months to finalise - were announced yesterday in both New York and London. At a joint meeting in London, Peter Smith, chairman of the UK firm of Coopers, and Ian Brindle, deputy chairman of PW, Europe, said they were a direct response to an increasing desire by global clients for a uniformly high standard of advice throughout the world.
"In the UK there are many companies with a truly global reach and this merger is about helping them to improve their competitiveness around the world. They expect their advisers to be just as global in the way they think and operate," Mr Smith said.
The merger proposal marks the first significant development since Arthur Andersen acquired Binder Hamlyn, a highly-rated firm just outside the Big Six, in October 1994. But it continues a consolidation that began in the 1970s, so that by the beginning of the 1980s there were eight dominant firms. By the middle of this decade, that number had been reduced to the Big Six. It now looks as if the top tier will contain just five firms, though this development has prompted speculation that - provided competition authorities in Europe and the United States allow the deal - there could be yet another reduction, to four, with Deloitte Touche, formerly known as Touche Ross, thought to be the most likely target.
Much of this consolidation has been due to a more competitive environment. Regulatory audit, in particular, has come to be seen as a commodity service that produces little profit, and in the UK large accountancy firms have recently been following their practice in continental Europe of moving into the potentially more lucrative legal services market as well as bolstering their presence in the well-established field of management consultancy.
Coopers and PW claim to have produced record growth in revenue in recent years, but in a world of private partnerships where disclosure of financial information is not compulsory others suggest that the figures are not as good as those of some of their rivals.
The two firms put some of this down to a lack of trained staff, and claim that it is possible the combined firm would employ even more people than the two operations do now. James Schiro, currently chief executive of PW and due to take the same role in the merged operation, said both organisations were "firmly committed to providing outstanding career opportunities for our exceptionally talented people".
However, the two firms still have several hurdles to overcome before the deal can be completed. For instance, Coopers' previous merger, with the UK arm of Deloitte Haskins and Sells in the early 1990s, took a long time to complete and eventually led to the departure of many partners.
PW, on the other hand, has two attempted mergers behind it - with Deloitte and with Arthur Andersen. And Mr Brindle said he was determined that the process be completed as soon as possible.
In addition, there are inevitably differences between the two firms' partnership arrangements, since PW has moved closer than many of its rivals to becoming a single world-wide partnership through the recent combination of the US and European operations.
In an effort to win their backing quickly, the managements will be making extensive presentations to partners, staff and clients while the due diligence on both firms' world-wide operations continued.
However, regulatory approval is perhaps the toughest potential stumbling block. Rival firms were quick to join the Association of Chartered Certified Accountants in pointing out the extent to which the deal would limit choice. Nick Land, senior partner of Ernst & Young, said he thought the competition aspect was "a real issue", while KPMG said it was concerned about that aspect.
Mr Brindle said the planned deal had come about through "overtures" at various meetings between the two firms for some time. But he added that earnest talks had not begun until this summer.
The organisations' managements had decided to publicise the discussions once it had become clear that they had a lot in common in terms of strategy and vision. Furthermore, the two firms complemented each other geographically and in terms of business areas.
However, it was being suggested last night that the real driving factor behind the proposed deal was the two firms' comparative weakness in the United States. Coopers is fifth and PW sixth out of six.
Some rivals said that the development may have been prompted by Price Waterhouse, since it has been suggested that the firm had been struggling to repair its image in the wake of the collapse of the Bank of Credit and Commerce International, of which it was auditor. However, Mr Brindle dismissed these claims, while Mr Smith said his firm would not be contemplating a link if it felt there was a problem.
Pointing out that potential law suits were hanging over all the leading firms of accountants, he added that Coopers and PW were united in lobbying for a change in the law to allow professional partnerships to protect themselves from being wiped out by legal claims.Reuse content