upbeat, despite an acknowledgement some clients could decide to go elsewhere, reports business writer Ahmed ElAmin The merger of Ernst & Young and KPMG Peat Marwick will make the combined entity the largest accounting and consulting firm both locally and internationally.

The managing partners of the local firms discounted the likelihood of any staff layoffs due to the merger, stating they were currently expanding operations in Bermuda due to the growth of business.

Ernst & Young, which also operates locally as Kempe & Whittle, has eight partners and a total staff of 140. KPMG, also operating as Butterfield & Steinhoff, has nine partners and 110 staff.

Internationally the pending merger will create a firm which operates in 135 countries with revenues of $18 billion and 160,000 staff. The merger will vault the international partnership above the company being formed by the previously announced merger of Price Waterhouse and Coopers & Lybrand.

KPMG's worldwide president Colin Sharman will become chairman of the merged firms. Michael Henning, Ernst & Young's worldwide chief executive, has been named as the chief executive. The merger is expected to be completed by the start of next year.

Jan Spiering, managing partner of Ernst & Young locally, said he and Bob Steinhoff, KPMG's managing partner, would be meeting over the next month to determine the details of the new organisational structure. "We are just commencing our discussions,'' he said. A report on the international merger by Bloomberg news service stated the combined firms would probably cut partners and staff by about 20 percent. Mr. Spiering said Ernst & Young locally was currently seeking new staff.

"There is no intent that there will be any layoffs,'' he said. "We are still in an expansion stage. We may be different from the international trend.'' He said firm's consultancy practice was experiencing "significant expansion'' but the demand for accountancy services was also growing.

Once the merger is complete both firms would probably consolidate operations at one location in Hamilton he said. Mr. Steinhoff said KPMG was also experiencing growth and that the merger would help solve some of the firm's problems in finding staff.

"We have been in a hiring mode over the last six months,'' he said. He said the merger would combine the strengths of both firms and provide a broader range of services to their clients. KPMG's strength was in insurance, tax and actuarial services, while Ernst & Young's lay in information technology consulting.

"We will complement each other's skills,'' he said. As to whether the merger will result in the loss of some clients concerned about conflict of interest Mr. Spiering acknowledged there might be a few who decide to take their business elsewhere. For example two companies in the same line of business might not want the same firm giving them consulting advice. Or a company would not want one firm doing both the accounting and the auditing of its books.

"There are a few situations where there are potential conflicts especially in a small place like Bermuda,'' Mr. Spiering said. "I am not aware of any significant conflicts. We would manage any client concerns and therefore not end up with any problems in that regard.'' Approval in principle for the merger has been given by the top management of both firms. The next steps will be to get regulatory and partner approval internationally. The companies have been in talks for the past two weeks about the merger.

"The timing is of course influenced by the recent announcement of the merger of Price Waterhouse and Coopers & Lybrand,'' KPMG's worldwide president Colin Sharman told the press in London, according to a Bloomberg report. Cooper & Lines, the local entity of Coopers & Lybrand, has a staff of about 100 in Bermuda. Gray & Kempe, the Price Waterhouse entity, has a staff of about 55.

Robert Steinhoff Jan Spiering