Six of the best

The Big Six have done more than their fair share during the past year to make the award of the Accountancy Age large firm of the year to be the closest in the competition’s history.

Despite being confronted with a mountain of potentially-crippling litigation, and constant price pressure from a value-for-money driven client-base, the leading firms have all defied the odds to carve out a successful path to growth on the back of economic recovery.

How much growth the Big Six have managed to secure this year is not yet apparent as all the firms took the collective decision to boycott the traditional June deadline for releasing their results. Some, including Deloitte & Touche and Ernst & Young, have promised to reveal their figures later this year, in line with their true year-ends.

That aside, the firms have all made strong cases for their inclusion as possible winners of this year’s award.

KPMG

KPMG, in keeping with its position as the winner of the Accountancy Age award two years in a row, has made the early running.

In January, it broke ranks with the other Big Six firms by becoming the first practice to publish a set of plc-style financial results, following its decision to incorporate its audit arm late last year.

The move offered a rare glimpse into the inner workings of a Big Six firm. More significantly, it meant that KPMG had sacrificed one of the sacred cows of the corporate partnership by revealing for the first time details of the financial affairs of a major partnership to the outside world.

A host of never-before-seen information, such as senior partner Colin Sharman’s annual salary package of z740,000, were made public. The firm also revealed that it had made a pre-tax profit of z17.9m and that the average KPMG partner, of which there are 565, made around z180,000 a year.

At the time of publication, Sharman emphasised the unprecedented nature of KPMG’s action and hinted at the massive gulf which had opened up between his firm and the other Big Six. He explained that his firm had been the first to recognise that it had to act to satisfy the public demand for greater disclosure from leading firms which among them audited nearly all of the FTSE-100 companies.

KPMG’s ability to stay one jump ahead of the profession’s expectations was again demonstrated in August when it chose leading Group A firm Grant Thornton to audit its incorporated business. The appointment took the other firms by surprise as most had speculated that KPMG, which has nearly 400 listed audit clients, including 21 in the FTSE-100, would have plumped for a small practice for such a sensitive job and not a firm often competing for work with it across many of its core service sectors.

COOPERS & LYBRAND

But KPMG is by no means the only firm to make a splash during the past year. Coopers & Lybrand, which according to 1995’s growth figures, was the largest accountancy firm in the UK, has enjoyed its own share of success, landing the prestigious contract to audit Equitas, the mammoth reinsurance business set up by Lloyd’s of London, said to be worth around z1m in fees a year.

The firm, which earned more than z89m in audit fees from its 28 FTSE-100 clients, took on its 29th client in June when it snapped up Pannell Kerr Forster’s only remaining top 100 company, Williams Holdings.

A major turning point for Coopers came in May when it unveiled plans to restructure its UK business from its traditional regionally-based set-up to a national one focused around five core units: business assurance; business recovery and insolvency; corporate finance; management consulting; and tax and human resource advisory services.

Coopers said the move was a reflection of the changing marketplace which had forced it to come up with a new strategic approach to providing its services to clients.

PRICE WATERHOUSE

Price Waterhouse has also made a strong case to be this year’s large firm of the year. The firm has matched Coopers’s success in the audit market. Only last week, PW unveiled its latest FTSE-100 audit coup by snatching the Smiths Industries account, the jewel in Clark Whitehill’s client-base.

The past year for PW has been dominated by its planned move to Jersey.

The firm, along with its Big Six rival Ernst & Young, has led the profession’s charge to set up LLPs to counter the burdens placed on auditors by the existing laws of joint and several liability. In PW’s case, the firm has even collaborated with Jersey’s Government to draft the LLP’s legislation.

PW’s fierce determination to force the UK Government’s hand on the joint and several issue has succeeded in drawing Deputy Prime Minister Michael Heseltine into the debate, forcing him to make a series of last minute overtures to prevent firms registering off-shore.

Another notable achievement for PW has been its successful foray into the world of legal services. PW linked up in April with the legal practice of Arnheim, becoming the second Big Six firm after Arthur Andersen to set up its own stand-alone legal practice.

PW’s legal tie-up opens up the possibility of other Big Six firms opting for multi-disciplinary practices in a bid to provide one-stop shop of services to their clients. The remaining firms have all expressed an interest in following Andersens and PW, but, with the exception of E&Y which is to unveil its plans later this month, all are still holding back from making a commitment.

ERNST & YOUNG

PW’s Jersey partner Ernst & Young has had its own share of success this year. Its single-handed takeover of the Accounting Standard Board’s landmark document, The Statement of Principles, earlier this spring gave the firm unprecedented prominence, leading the Financial Times to devote an entire page to letters on the ASB debate. E&Y’s technical partner Ron Paterson and recently-appointed senior partner Nick Land managed to superimpose their own interpretation of the ASB document so successfully that for many in industry and in the profession, the E&Y response to the statement became more widely-read than the original work.

But E&Y’s achievements go beyond its headline grabbing prowess. The firm has negotiated its way out of the web of Lloyd’s litigation by contributing around z50m towards the insurance market’s global settlement offer to its 34,000 Names. It has also defeated several potentially ruinous lawsuits, brought by disgruntled clients, clearing away some of the liability claims facing it.

ARTHUR ANDERSEN

As for fellow Lloyd’s panel auditor, Arthur Andersen, 1996 has proved to another year of continued growth.

Managing partner Jim Wadia refuses to discuss the firm’s figures until this autumn’s publication of results for the entire worldwide business.

However, it must be very frustrating for Andersens to have had to agree to abide by the Big Six’s collective decision not to publish any fee income figures this June. According to most estimates, the firm has outstripped its nearest rivals in the UK this year.

But Andersens success has brought its own headaches. The parent business, Andersens Worldwide, is at the moment in the middle of a massive internal re-organisation which could force the firm to restructure itself into several small market-focused units in an attempt to continue its growth.

Details of the proposed move, drawn up by working party of a dozen senior Andersens partners, are still sketchy, but a decision on the firm’s future will be taken at a meeting in the USA later this month.

DELOITTE & TOUCHE

For Deloitte & Touche, the smallest of the Big Six firms, the past year has been most notable for its staunch refusal to sacrifice the traditional status of the partnership accountancy firm in favour of any quick-fix solutions to problems such as auditors liability, or the move towards multi-disciplinary practices.

Senior partner John Roques has publicly espoused the traditional values of the professional partnership. He has distanced his firm from the others’ LLP plans, and played down the firm’s interest in establishing a toe-hold in the lucrative legal services market.

Among the notable highlights of the year for the firm has been its successful change of name, after being known as Touche Ross for 100 years, to Deloitte & Touche.

In February, Deloittes began the first stage of building its huge worldwide consultancy business by linking its UK and US practices. The next stage, to take place over the next few months, is to integrate the Canadian and European divisions into the new structure. The scale of the operation and the blending of the various business cultures and practices alone makes Deloittes’ ambitious enterprise worthy of consideration for this year’s award.

In some ways, it is churlish to narrow the activities of the Big Six during the past year down to a handful of achievements. The leading firms operate in a unique environment far-removed from the often frenzied struggle for survival, which is the lot of smaller practices, but still offers its own set of special problems.

Ultimately, what distinguishes each of the Big Six firms is the way they approach their marketplace and how they do business. Individual commercial successes, while noteworthy in themselves, are not true yardsticks of achievements unless they contribute towards long-term growth. Competition among the top six firms is, and always has been, fierce, and if that is anything to go by, then choosing a winner for the large firm of the year will be equally hard.

Hooman Bassirian is the News Editor on Accountancy Age.

LARGE FIRM OF THE YEAR

Sponsored by International Factors The Big Six are automatically selected for inclusion in this category.

They will be judged by Accountancy Age questioning of the client world about the ability of the Big Six to: produce top-quality work; satisfy customer expectations; and negotiate cost-effective solutions. Areas under scrutiny will be the entire range of accountancy and professional solutions, including IT, audit, human resources and tax. As well as excellence here, we will be looking for evidence of major initiatives which have driven the firm forward, delivered a commercial advantage and expanded the customer base.

Past winners: 1994 and 1995 – KPMG Sponsor: International Factors launched the UK’s factoring industry in 1960 and remains one of the country’s leading invoice finance companies, providing z500m to over 2,200 businesses throughout the UK. Through a clearly defined commitment to a customer-orientated service, International Factors ensures it provides SMEs with a complete financial solution by enabling companies to make use of funds generated from their own sales.

Accountants are key partners for International Factors, and research carried out by the company shows the benefits of invoice finance are well understood among the accounting profession – it provides working capital, protects businesses from bad debts and late payment and improves cashflow.