Categories
Profession

Grant Thornton UK swallows Robson Rhodes whole

Grant Thornton in the UK merged earlier in the year with RSM Robson Rhodes, making it “a leading player in the mid-market and the provider of non-audit services to one in four of the FTSE 100,” according to GT’s chief Michael Cleary.

The board of the merged entity makes the transaction look more like an acquisition:

Michael Cleary heads up the board as chief executive, but, of the former Robson Rhodes partners, only David Maxwell has a berth on the panel, which has seven members in total.

So basically Grant Thornton is maintaining control over the new entity through its board. Is this good or bad? Shouldn’t there be more than one former RSM partner on the board, since there are 7 members? Seems strange to me is all. Makes me think the merger was just to acquire RSM’s clients rather than really synergize and reap the benefits of shaking things up for both groups management-wise.

Michael Cleary was so effusive in press releases after the merger that this was heralding in a new age for the merged firm, in terms of providing the Big Four with some real competition.

Jeremy Newman of BDO at the time commented that his firm was going in a different direction in taking the fight to the Big Four’s dominance, and that merging to compete was sending the wrong message about what it really takes to provide a Big Four level of service to clients. Basically, the message was that size matters. Jeremy has been adamant that it is investment in people that really matters at the mid-tier level.

Time will tell which strategy works better.

Categories
Profession

Big Four dominate professional services globally

The Managing Partners’ Forum was established in 1995 and is “dedicated to enhancing leadership and the status of the management team in professional firms worldwide.” They recently released the inaugural Global 500, a ranking of the top 500 professional services firms in the world by fee volume.

The Big Four are at the top of the list, with PricewaterhouseCoopers coming first, followed by Deloitte, Ernst & Young, and KPMG. Interestingly, Accenture, formerly Andersen Consulting, formerly a division of Arthur Andersen, formerly the auditor of Enron, formerly in existence, occupies the number five spot:

  1. PwC – $22.0B
  2. Deloitte – $20.0B
  3. Ernst & Young – $18.4B
  4. KPMG – $16.9B
  5. Accenture – $16.7B

I threw the numbers into Excel to do a little analysis. First, I wanted to see how they stacked up in terms of revenue per employee, since the report provided the number of employees. The third ranked firm in total revenue, Ernst & Young, is #1 when it comes to revenue per employee at approximately $161,000. The average of the Big Four is $154,000. The remainder of the four are in the same order as revenues, with PwC and Deloitte shuffling down to make way for E&Y:

  1. Ernst & Young – $161,000
  2. PwC – $154,000
  3. Deloitte – $151,000
  4. KPMG – $150,000

Beyond the Big Four, the next largest accounting firm is BDO at 22nd overall. Rounding out the top 10 accounting firms are Grant Thornton (35th), RSM (36th), Baker Tilly (46th), Horwath (48th) and Moores Rowland (50th). The average revenue per employee for those five firms is $114,230, which is significantly lower than BDO, in the middle of everyone, at $140,500.

The bottom of the Big Four in terms of total revenue is KPMG, but it is 332 per cent higher than BDO. There is about 10 per cent separating each of the Big Four, with PwC 10% larger than Deloitte, which is 9% larger than Ernst & Young, which is 9% larger than KPMG. BDO is about 40% larger than Grant Thornton and RSM. So the Big Four more spread out between each other than I’d originally thought, but is leagues above the rest of the pack which comes as no surprise at all.

It’s an interesting list, by an interesting ‘Forum’. Management in professional firms is a different beast altogether from management of more traditional “operations”. Experienced employees are an intangible asset of any type of business, but in professional services firms there are unique challenges which require special people skills. A good managing partner is so important to retaining strong team members and keeping them (us) satisfied.

(Via Accountancy Matters.)

Categories
Auditing

Grant Thornton UK merges with RSM Robson Rhodes

Although they’re possibly (likely?) completely unrelated, the recent announcement in the UK that Grant Thornton would merge with RSM Robson Rhodes comes hot on the heels of the announcement in Canada that BDO Dunwoody and Grant Thornton here would enter into discussions on the possibility of merging.

The partners of Grant Thornton UK LLP and RSM Robson Rhodes LLP have today announced their agreement to merge the two firms to create one of the strongest accounting and business advisory groups in the UK.

The UK merger is a done deal according to each party, whereas in Canada BDO and GT are only engaging in talks to see if they’d like to buddy up. Still, one can’t help but think the trend of mergers could continue in other countries, possibly even the US. And if BDO and GT do not merge in Canada, is RSM Richter next on the call list for either?

Some commentary in the UK has been towards the perceived reaction to the merger by BDO Stoy Hayward, whose managing partner Jeremy Newman blogs regularly. Damian Wild of AccountancyAge practices his creative writing skills:

It will, however, have caused a few BDO Stoy Hayward partners to choke on their cornflakes on reading the news in yesterday’s Sunday Telegraph and Sunday Times. Certainly it is a blow to [Newman’s] ambitions as it puts increased distance between [Grant Thornton and BDO].

Newman himself has a different, more nuanced, take on the merger:

Whilst clearly there are some advantages to being larger we are confident that we already have sufficient scale and expertise to handle the audit of all except the largest UK companies. Ultimately it’s the quality of your people and the resultant quality of audits and client service that matter. This is why we have invested heavily in recent years to ensure we have high quality, motivated people and will continue to do so.

Doesn’t sound to me like he’s choking on much at all. Nor should he be – it isn’t size that’s going to break the Big 4. Newman is on the right track with his blog and his campaign to bring Finance Directors around to the idea that a non-Big 4 firm can handle the challenge of a large public company audit.

It’s all about attracting and retained quality people with the skills and talent to conduct quality audits for companies large, medium, and small, and Newman recognizes this.

Categories
Governance

Conrad Black vows to regain business empire

From the Globe and Mail:

Conrad Black has vowed in a court filing to regain control of what remains of his business empire, but he’s also worried there might not be much left.

This struck me as a bit strange. I have to admit my experience with court filings isn’t extensive, but I just assumed they were pretty formal, standard documents. I didn’t think they could be used for vengeful, rhetorical purposes by the filer, but somehow Conrad made it happen. I wish they’d give the direct quote from the filings where he vows to get it all back.

But I digress. What really interested me once I read further:

Last week, Lord Black filed a motion in an Ontario court asking a judge to compel Ravelston‘s receiver, RSM Richter Inc., to explain how it is protecting the firm’s assets. Lord Black alleged Richter and new managers at Hollinger International and Hollinger Inc. have spent $250-million over the past three years on professional fees. He also alleged the firms have lacked focus and devoted their time to “examining the past to see if there are litigation ‘assets’ that can be pursued.”

Basically, Hollinger is going after Black for misappropriating the company’s assets, and by doing so, Black believes they are paying too many legal and consulting fees. The litigation assets, I would imagine, are Black’s thievings, and the lawyers have probably been hired to figure out how Hollinger can get some of it back! Oh what a tangled web.