In particular, eyes were focused on the performance of the very large international networks the Big Four had reported healthy growth, but, as was reported seven months ago, KPMG had yet to reveal its latest results.
But it would appear there was no need to worry unduly when the smallest of the Big Four networks published its results in January this year, it showed that fee income had risen 15%, from just under $20bn (£13bn) to a respectable $22.7bn.
Exchange rates would have had an impact on these results (KPMG said that in local currencies growth was more along the lines of 8%), but given the economic climate, it was still a solid performance.
So where has this growth come from? A mixture of regional growth and solid performance across service lines.
‘All of our businesses recorded solid growth last year, despite the deepening and acceleration of the global financial crisis in the last quarter of KPMG’s fiscal year,’ said Tim Flynn, KPMG’s international chairman.
However it does not seem logical that all the networks will be able to sustain their growth rates, despite the counter-cyclical nature of some of their work.
That said, the networks remain bullish about their prospects, with many seeing good opportunities for growth in areas such as China, Latin America and East Europe.
There are a number of concerns, especially among the mid-tier and smaller, independent associations.
These fall under the categories of liability ongoing court cases in the US in particular are being monitored very carefully and competition from larger rivals. Some networks and associations have indicated that the Big Four are beginning to muscle in on their own, natural territory among smaller, more entrepreneurial businesses.
‘The big firms are coming back to a space that they gave up a few years ago,’ says John Wolfgang, chairman of UHY International, ranked 25th in the survey. ‘We have seen it time and time again over the last six to eight months. They clearly have resources that are untapped at the moment,’ he says.
Faced with such competition, organisations like UHY say they are re-enforcing with their clients the reasons why they joined them in the first place.
As John Mendelssohn, chief executive of MSI Global Alliance ranked 21 in the survey says: ‘We are seeing clear evidence of our member firms benefiting from the fact that clients are becoming more critical buyers during a downturn. These clients are questioning whether they need the services of a Big Four firm, and indeed whether they can justify the cost of such services.’
In fact, Mendelssohn sees this as a good opportunity for his members. ‘We believe this recession is so severe that it will change buying patterns for good, not just for the duration of the recession, and this has to be good news for firms that are well-positioned to capitalise on the opportunities available by, inter alia, being part of an association,’ he says.
In order to remain competitive, some organisations believe we could see mergers, both at a national level and internationally.
As DFK International ranked 22 said in response to the survey: ‘The economic downturn will result in mergers between associations/networks so this is both a threat and an opportunity.’
Such views were shared by, among others, IGAF ranked 19 while others, such as JHI (27) saw the threat of losing firms to larger networks and mergers. JHI did, however, observe that the nimbleness of response and on-the-ground knowledge played into the hands of independent firms and smaller networks.
Aside from the economic situation, one of the other major fears of the international organisations remains the increasing threat of litigation, a course of action that becomes all too familiar during a downturn.
‘Risk of litigation is probably the biggest threat of all; we’ll be watching the current legal cases in the US very carefully,’ says PKF, ranked 16.
Such cases include the long-running BDO battle in the US. This revolves around whether BDO International should be held liable alongside its US firm, BDO Seidman, for work carried out by the US firm at Banco Espirito Santo. In 2007, a court found BDO Seidman to have been ‘grossly negligent’, bringing the firm’s total liability to $521.7m.
The hearing on whether BDO International should share responsibility has been continually delayed, creating greater uncertainty among other international organisations.
Question of responsibility
This is why many of the groupings have been at pains to point out that they are a collection of independent firms, where one firm, or the whole organisation, should not be held be held responsible for the failings of other, albeit closely related, firms.
As UHY’s Wolfgang says: ‘It is a daily worry. We look at it all the time. There is always going to be some risk there, all you can do is work to minimise it based on the legal advice you get. As some of these cases become a little bit clearer, and some of the definitions become more understandable, it will give us a path to follow.’
But even with this worry hanging over them, the firms in the survey are broadly optimistic - they can see opportunities for growth around the world, and many are looking to take in new member firms to plug holes in either their geographic reach or in particular sectors.
As Alliott Group (30) says: ‘Our strategy for the next five years is to consolidate our presence in existing markets and to look to identify appropriate firms in those geographies where we currently do not have a representative member. Even taking into consideration the current economic climate, we see great opportunity for growth as mid-tier accounting firms look to capitalise on the opportunity of winning new work from SME businesses, as these firms look to identify new (cheaper) alternative sources of professional advice and support, and to utilise the benefits of membership of groups like Alliott Group to support such work.’
UHY are on the same path. ‘We have been looking to grow the network, but within our philosophy, targeting firms that share our values and our strategy. Last year we added 11 countries, and our plan for 2009 is to add somewhere between seven and ten more members. And we are well on our way,’ says Wolfgang.
This year could prove to be an interesting time for these organisations. While the Big Four have just about got every country on the planet covered PricewaterhouseCoopers claims to have pitched its flag in 153 countries there are still plenty of geographic gaps for the other groups.
Such gaps could be filled by poaching national firms from other groups - witness how Chinese firm Zhonghua switched from BDO to Grant Thornton - or it could be through wholesale mergers between groups - historians will recall this was one of the reasons behind the Price Waterhouse/Coopers & Lybrand merger back in 1998.
Either way, expect to see some movement while the organisations continue to prosper.
Best of the rest
Firm - Rank - Income - chairman/chief exec
Kingston Sorel Int - 31 - $312m - Sir Michael Snyder
INPACT Group - 32 - $284m - Richard Mehall/Antonio Bragaglia
GMN International - 33 - $242m - Cameron Johnstone
ECOVIS - 34 - $239m - Ingrid Westphal-West
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