This week Ernst & Young became the latest to announce a restructuring. It proposes integrating 87 national practices in Europe, the Middle East, India and Africa into a single unit. It is undertaking a similar exercise in the Far East, having already unified the Americas in 2006.
In doing so, it is following in the footsteps of KPMG, which merged its German and UK firms, and Deloitte, which combined its UK and Swiss practices, in 2006.
So what are the firms’ intentions? Well, consistency is chief among them. Despite operating as global businesses, many have harboured doubts about the quality of some national practices. Last year’s termination by PricewaterhouseCoopers of its Japanese member firm was the highest profile example of this. Bringing all under one umbrella allows firms to instill confidence that they can offer the same service globally.
But all is not so simple. It is hard to tell whether there will be any real sharing of profits, which has to be the acid test of whether these really are unified practices.
Ever since we began compiling Accountancy Age’s Top 50 to monitor and measure firms, we have been encouraged to use profit sharing as a test for whether practices are firms or networks. What applies domestically has to hold globally.
It also applies to risk. The risk of liability sharing is why Grant Thornton severed ties with its Italian firm so quickly during the Parmalat scandal. The fact that E&Y says it hasn’t taken on ‘appreciably more risk’ as a result of integration is illustrative.
Without the sharing of risk and reward, these arrangements will only ever amount to a partial solution.
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