Forget mergers between firms as the biggest threat to accountancy jobs. With the rumour mill quiet about the next marriage, the emphasis has shifted towards mergers between departments.
Across the economy more and more industries have seen the benefits of recruiting people who are able to fulfil more than one role. Now the blurring of previously distinct lines has reached the specialist worlds of insolvency and corporate finance, there is the looming prospect that one person could do both jobs. And that rarely happens without businesses taking the opportunity to examine their headcounts.
For as long as most accountants can remember, the tasks of an insolvency practitioner and a deal adviser were so far apart that only the most visionary could have imagined a time when they would be working side by side or, indeed, come together in one person.
Yet the summer has seen both Ernst & Young and KPMG announce restructurings to merge the skills of insolvency and corporate finance. Many within the profession now agree that a single business solution department staffed by people with a full range of skills is not too far away.
Insolvency, or corporate recovery, has undergone a major transformation since the boom time of the 1980s, when the recession sent the number of formal insolvency cases rocketing. Since then, the growth has shifted to less formal areas of insolvency. Turnaround work, where the job of the specialist has become more advisory in nature in order to rescue a business before problems become insurmountable, has been the principal beneficiary.
At the same time, corporate finance has become the major money-spinner for the Big Five. The biggest firms have added hundreds of millions of pounds to their fee incomes through advising clients on project finance, due diligence and mergers and acquisitions.
PricewaterhouseCoopers was the first to consider formalising the links between the functions by creating a financial advisory services line when its merger was completed last summer.
The unit blends the skills of M&A, corporate value consulting, project finance, business regeneration, business recovery, dispute analysis and investigation under one roof.
PwC corporate recovery partner Steve Hill says the benefits of the arrangement are considerable. ‘What people are looking for is a solution to business problems and a corporate in difficulties might need insolvency advice or it might not,’ he says. ‘Offering the services under one roof means bringing the right specialists together in a hurry.’
But the move has not been without its costs. Earlier this year, 80 PwC insolvency practitioners lost their jobs. The firm denied the cuts were anything to do with restructuring and insisted it was more to do with slackening demand. However, when E&Y did the same – eight partners lost their jobs – the links between departmental mergers and lower headcount appeared to become more established.
At E&Y, the change has taken the form of a takeover by the corporate finance department. In the case KPMG, the firm’s corporate finance unit will be merged on 1 October with recovery, transaction services and forensic accounting to form a FAS group along the lines of PwC. Unlike at E&Y, job numbers are not expected to suffer. According to KPMG corporate finance managing partner John Griffith-Jones, the changes are dramatic, but are more indicative of the fact that corporate finance has reached a critical mass that now needs to be fitted into a bigger structure.
Griffith-Jones agrees, however, that there will be major opportunities to cross-sell with transaction services which deal with due diligence and post-deal integration.
Despite the mainly positive nature of these moves within the industry, there could be a major stumbling block: client confidentiality. Conflicts of interest – and potential conflicts of interest – mean the word ‘merger’ cannot be used too literally to describe the internal changes.
A firm working with a client on corporate recovery, for example, could not offer due diligence, so firms will have to be doubly careful about keeping Chinese walls intact. It remains to be seen whether the changes will produce a rash of claims from disgruntled clients, but last year’s high-profile Prince Jefri case involving KPMG has ensured the potential for conflicts is upmost in firms’ minds.
Griffith-Jones says KPMG will be extremely careful; and it will have to be as the changes will not just take place in the UK, but around the world.
But not all firms are being sucked into the tide of restructuring. Deloitte & Touche’s plans do not include any merging of departments. It believes that corporate finance and recovery already work closely enough without the need for a formal change.
Whatever the current positions of the Big Five, it is unlikely that the current moves will mark the end of the story.
And this wave of internal mergers might only be the beginning as multi-skilling becomes the new buzzword for accountants.’
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