Deloitte and Touche Ross Seal Merger
As expected, the firms Deloitte Haskins & Sells and Touche Ross & Co. said Sunday that their partners had approved a merger that will create a worldwide firm, to be known as Deloitte & Touche in the United States, with annual revenue of more than $4 billion.
The merger of the two agencies, first announced last month, is the second this year among elite U.S. accounting firms, reducing the so-called Big Eight by two. In addition, two more top firms are discussing a possible marriage.
In May, Ernst & Whinney and Arthur Young & Co. agreed to combine operations in a firm with worldwide revenue of $4.2 billion and domestic revenue of $2 billion. That deal is completed and the new firm, Ernst & Young, formally begins operations Oct. 1.
Arthur Anderson & Co. and Price Waterhouse last month confirmed that they are discussing merging to form the world’s largest accounting firm. Analysts said the firms plan three more weeks of confidential negotiations and that the union is expected to go through.
Analysts have attributed the merger wave in part to competition in Europe leading to 1992, when the 12-nation European Economic Community plans to implement a border-free market.
A statement Sunday by the firms said the partners of Deloitte and Touche Ross--the smallest of the old Big Eight--approved the merger at separate meetings in Dallas last week.
The new firm will have 20,000 employees and 1989 revenue of nearly $2 billion in the United States and 45,000 employees and 1989 revenue of more than $2 billion in 100 other countries.
“This positions Deloitte and Touche near the top of the heap, which is where neither one has ever been,” Bowman said. “It will be interesting to see if they can continue to be the aggressive upstarts they have been.”
Touche Ross is considered strongest in the Far East with Deloitte a major presence in Europe.
Internationally, the new firm will be known as Deloitte Ross Tohmatsu International. It will draw on the expertise of Japan’s largest audit firm, Tohmatsu Awoki & Sanwa, a member of the Touche Ross International organization.
Partners outside the United States are expected to approve the merger in votes in the next two months, the firms said.
Despite their ranking at the bottom of the Big Eight, Deloitte and Touche have posted the most rapid growth in recent years.
According to Bowman, their average individual worldwide revenue jumped more than 88% from 1985 to 1988. Last year their worldwide growth averaged 26%, compared with an 22% for the other Big Eight firms.
Deloitte in 1988 had $820 million in U.S. revenue and $1.92 billion in international revenue, while Touche Ross had $796 million in U.S. revenue and $1.84 billion in worldwide revenue.
Deloitte’s audit clients include General Motors, Kimberly-Clark, Monsanto and Procter & Gamble. Touche Ross clients include American Motors, Chrysler, Litton Industries and Pillsbury.
An Andersen-Waterhouse merger would create a firm with $5 billion a year in worldwide revenue and $2.7 billion in U.S. revenue, displacing the new Ernst & Young at the top.