PRICE WATERHOUSE, COOPERS & LYBRAND TO CONSOLIDATE.

Byline: Katherine Burton Bloomberg News

Coopers & Lybrand LLP and Price Waterhouse said they plan to merge to create the world's largest accounting and consulting firm.

The combination would vault Price Waterhouse and Coopers & Lybrand ahead of industry leader Arthur Andersen Worldwide and second-ranked Ernst & Young, and whittle the so-called Big Six accounting firms down to five.

The merger comes amid consolidation in the financial services industry worldwide and is the first to affect the accounting and consulting industry since two mergers at the end of the 1980s.

``Our clients require seamless global support and levels of expertise that, until now, were simply not available from any one organization,'' said Coopers & Lybrand Chairman Nicholas Moore. ``We have complementary strengths, so we saw this as a good fit.''

Moore will be chairman of the merged firm. James Schiro, chief executive of Price Waterhouse, will be chief executive. The companies haven't yet decided on a name, but analysts said they expect that Price Waterhouse will be the lead name because it has stronger brand-name recognition.

Being the largest is important because ``it brings bragging rights,'' said John Higgins, who's been a spokesman in the accounting industry for more than 15 years. ``There's a correlation in clients' minds between size and quality, so if you are big you must be better than everyone else.''

Moore said one of the big drivers behind the merger was the fast-growing consulting business. ``Consulting is a highly profitable business that is underexploited'' in both emerging markets and developed countries, he said.

The two firms have complementary strengths in the area, he said, with Coopers & Lybrand, for example, known for consulting on personnel issues while Price Waterhouse is strong in consulting on information technology.

The combined companies would have gotten 25 percent of the total revenue from consulting in fiscal year 1996, according to Arthur Bowman, editor of Bowman's Accounting Report in Atlanta. Both firms saw U.S. consulting revenue jump by about 20 percent in fiscal year 1996.

``It takes them to a league above Andersen Consulting that would be very attractive to global clients,'' said Philip Abbott, chief executive of the Industry Research Group, a London-based professional services consultancy.

Combined global fees of the two companies in fiscal 1997 exceeded $13 billion, they said in a statement. In fiscal year 1996, the firms would have had combined revenue of $11.8 billion, compared with $9.5 billion for Andersen Worldwide and $7.8 billion for Ernst & Young International. All the firms are privately held by their partners and don't disclose profits.