An eraser tip is poised above the ledger that lists the nation's top accounting firms, the Big Eight. A proposed merger between Price, Waterhouse & Co. and Deloitte Haskins & Sells could reduce the Big Eight to seven. If more mergers follow, scratch that. Put down six, maybe even four, some speculate.
Mergers aren't really new to the accounting industry, but they are to the Big Eight. ''The unusual thing about this one,'' says John Burton, dean of the Columbia University Graduate School of Business, ''is that these are two Big Eight firms merging for the first time.''
Enormous responsibility rests in the hands of those who work for these prestigious multinational firms. Their clients dominate corporate America, accounting for 94 percent of all the sales, profits, and employment of companies listed on the New York Stock Exchange, according to ''The Big Eight'' (Macmillan , 1981). Their core job is to audit client finances, but over the years they have moved beyond cutthroat competition in auditing to other services, such as tax and management consulting, now hotbeds of competition themselves.
Merger talk seems widespread among these top firms and in the tier below. ''Every single substantial accounting firm in the country is talking to someone else or is being talked to at any given time,'' says Mark Stevens, a respected syndicated columnist on small business and author of ''The Big Eight.'' ''I think we're going to see a lot of mergers.''
On the phone from international headquarters in Geneva, Duane Kullberg, chief executive of America's largest accounting firm, Arthur Andersen & Co., voices a similar intuition: ''The press keeps writing about it, but I frankly also hear rumors about other firms merging. I suspect there's more of it coming.''
The Price, Waterhouse team-up with Deloitte, which will hoist the combination into the No. 1 spot, with combined yearly revenues of $1.9 billion, is not a sure thing. The Justice Department has approved it, but he two firms still haven't heard from the British government, which, because both firms have extensive networks there, also needs to give consent. The effective date of the union is supposed to be Jan. 1.
Pro and con opinions on the merger stack up like assets and liabilities on a balance sheet.
On the liability side: Mr. Stevens fears clients could suffer if these large partnerships turn into mega-companies. ''In many cases, bigness is the enemy of quality,'' Stevens says. The new duo ''would have to make sure that its signature means the same thing every place it's applied. That becomes increasingly difficult to do when you have thousands and thousands of partners.'' While he doesn't think being No. 1 is the only motivation here, ''the empire syndrome,'' as he puts it, plays a part.
On the asset side: ''All of my experience tells me there are going to be savings (in this merger) and that these firms have identified them,'' says William Seidman, former managing partner of the Seidman & Seidman CPA firm and now dean of the College of Business at Arizona State University.
Indeed, ''economies of scale apply,'' confirms Michael Cook, a managing partner of Deloitte Haskins & Sells, now the seventh-largest firm. For instance, both firms incur substantial costs recruiting at the same universities, Mr. Cook says. Training efforts, also a big cost in this people-intensive business, could be consolidated. Both firms emphasize the financial services industry in their practice - ''a duplication'' of effort, states Cook.
''I think all the firms in the Big Eight and beyond are large enough to handle the issues at hand and to handle any sizable client,'' comments Mr. Kullberg, from Arthur Andersen. (His firm and others have faced hefty lawsuits this year: Some companies that do business with Andersen clients allege that the auditors were remiss in their duties and that this led to big financial losses.)
Instead of looking for new sources of revenue, Kullberg says, the accounting profession ''should be renewing the respect that it has had and ought to be plowing its profits back to basic services.''
Agreed, says Deloitte's Cook, who adds that the motivation for merger was to strengthen company similarities, not to look for new services, industry specializations, or locations that one firm had and the other wanted. Any such fits - and there are some nice gains in international locations - are ''coincidental,'' Cook says.
Both companies are making major investments to computerize the auditing process. ''We would make these investments on our own; Price Waterhouse would make them on their own; together we can do them more quickly and serve our clients better.''
In the tier below the Big Eight, the urge to grow is strong, too. The partners of Alexander Grant & Co., the 10th-largest accounting firm, is negotiating a merger with Fox & Co., the 12th largest. ''We think it will make us the largest firm that exclusively serves the middle market,'' says Robert Kleckner, executive partner of Alexander Grant, in Chicago. ''Size is important in terms of having enough offices of sufficient size to serve a client who is growing.''
Big Eight firms are concerned with clients that are growing - especially ones growing overseas. These CPA firms already have a multinational presence, but as business becomes ever more global, accountants need more global reach. Says Kullberg, of Arthur Andersen, ''If we were to do anything (with a merger), international expansion would be one of the reasons.'' He doesn't see any sense, however, in domestic expansion.
Whether the remaining members of the Big Eight pair up will depend on how well - and if - the Price-Deloitte merger works, says Dean Burton at Columbia. ''If Deloitte and PW prove to be uniquely more efficient in getting clients, that might drive'' the rest toward merger. Until that becomes clear, though, Burton feels the Big Eight will just stick to talking, thinking, and calculator punching.