In two months, Nick Land will walk out of Ernst & Young for the last
time. After 11 years as chairman, and having worked at the firm since 1970, will
he feel sad to go?
‘I’m not sure. It might be easier to tell you on the day I leave. I think it’s a
good time to go: markets are good, we’ve had an easy succession process, we’ve
got a great successor. I may well feel sad on the last day,’ he concedes.
But he’s not quite ready to throw in the towel. He is excited about the
opportunities opening up for him. At 58, he will take on a non-executive role at
Shell, pending shareholder approval. ‘There are other things, too, that people
are talking to me about. I’d like to be pretty active and have a bit of
diversity and continue to have a bit of fun,’ Land says.
So what have been his greatest achievements and regrets during his time at E
&Y? He ponders: ‘We and Price Waterhouse were the agitators and drivers for
LLP status. We’re proud of our leadership role in that.’
E&Y was the first to sell its consulting business, another achievement he
mentions. ‘I’m absolutely sure that was the right strategy and that there was a
real advantage in going first.’
He doesn’t mention regrets so much as the ‘less pleasant’ stuff. It’s just
over a year since the Equitable case began in the High Court. ‘There was some
satisfaction and some irritation clearly at the Equitable result. It’s difficult
to be completely euphoric when in our view it was unnecessary and cost our
insurers £20m in legal fees. Equitable was seeking to try to damage our business
through the media and frighten our partners and staff. But we kept our nerve and
got a pretty good conclusion.’
Further back, and before his time as chairman, he cites the Ernst &
Whinney/Arthur Young merger in 1989 as a success. ‘I think we did that merger
very well. Mergers are never easy. We did exactly what we tell our clients to do
have a 100-day plan and smash the organisations together.’
A CASE OF THE EARLY BIRD?
And then there was Andersen. He doesn’t dwell on the episode, which, alongside
the Price Waterhouse/Coopers & Lybrand merger, did much to create the Big
Four firms in the UK today. It all happened very quickly, he says. ‘We were
probably in discussion for not much more than a week in the UK.’
A global merger of the non-US Andersen firms was favoured, with KPMG
initially the front-runner. Clients were flooding away from Andersen, and with
revenues dropping, the firm’s partners wanted a quick solution.
Did Deloitte, which took on Andersen’s UK partners, just move more quickly?
‘They got themselves into a pole position around a global piece. What John
Ormerod [the former Andersen UK head] wanted was a quick deal. Andersen clearly
felt the Deloitte deal was the bird in the hand and the most certain.’
One rumour recently, when KPMG had trouble in the US, was that the rest of
the Big Four were holding off from poaching KPMG’s clients. But when Andersen
fell, it was said, they had actively sought Andersen’s clients. Is there any
truth in either of those arguments?
‘I’m not conscious of us rushing to clients of [Andersen’s]. I think it was
clients rushing to us. There was no sense of wishing to undermine Andersen. It
unfolded in front of the world. We were as surprised as anybody else.’
As for KPMG: ‘There was no conscious policy, certainly not in the UK. It was
business as normal. Nobody in their right mind would have wished KPMG to be
mortally damaged by the events unfolding in the US.’
Of the 1997 E&Y/KPMG merger talks collapsing, Land regrets little. ‘We
had very good and fruitful discussions on a global basis and around the world.
We concluded that it didn’t make sense for us. It was a great idea but it struck
us as being extremely difficult to put together. I got to know Mike Rake [of
KPMG] quite well through that and he and I remain jolly good friends.’
There was some suggestion the whole E&Y/KPMG proposal was just a ruse to
scare regulators into thinking the Price Waterhouse/Coopers & Lybrand
merger, also going through at the time, was a mistake.
‘That wasn’t true. We went into full-blown merger discussion. Some of our
practices had locally approved a merger. But obviously subject to a total
merger. It was a very serious courtship,’ Land says.
Reflecting more generally, Land takes a forlorn view of the debate over
competition and the Big Four. ‘I don’t understand how you create a fifth truly
global competitor. Maybe cleverer and brighter people will work out how that is
done. These firms weren’t created overnight they built up because they were
responding to the marketplace.
‘As the multinational model has evolved so we have all sought to respond to
that model, requiring us to operate in 50 plus countries. We developed global
audit methodologies, very sophisticated IT enablers and big knowledge
Nevertheless, Land concedes it’s ‘all a matter of willpower. Anything’s possible
if you have enough determination and enough money’.
Fewer than four firms, he says, would be a disaster. ‘I think if one of the
Big Four fell over – a very remote possibility the repercussions would be just
enormous. What would be the reaction of our partners and our staff? People begin
to turn round and say “Do we want to be working in this business?” Or “what do
we want to be in the audit business for?”.’
There has also been a fair amount of macho chat recently from leaders
at the Big Four about how much they are going to grow revenues by. Deloitte
hopes to make annual revenues of £2bn within two years. Is E&Y going to make
£3bn in three years?
‘I doubt it very much. The market continues to be competitive. Clearly if
it’s the right sort of growth with right margins and risk profile, having a
business growing ahead of your competitors is a very nice thing to have. It
creates opportunities for people. We’ve been in every position on the league
table. I don’t think one wants to get overly obsessed about it.’
What about Mark Otty, his successor. Is he in the same mould as Land? ‘I hope
not, in a way. The last thing the partners want is a Land replica. He is very
much of his own mind. We have some things in common, but our styles will be
It leaves little room for comparison. Possibly a relief to both.
What does Nick Land make of criticisms that E&Y’s new consulting business
risks reigniting rows over non-audit work compromising audit independence?
The consulting business E&Y sold to Capgemini, Land says, was not the
same business it is now. It was an IT business through and through.
He insists: ‘We are not re-entering that business. We are advising on the
decision-making process. Should X build a shared services centre? Should X
offshore? We will not run that shared service centre for X.’
Why wait for the non-compete agreement with Capgemini to run out, then? ‘Our
non-compete very crudely was whatever it bought from us, we could not go back
into the market for a period of time and sell,’ Land says.
On another issue, what does he make of threats from boutique consultancies
offering services like tax advice and corporate restructuring?
‘There are one or two areas where boutiques or smaller businesses have made
inroads, not just to the Big Four, but into the top end of our industry. One of
those areas is around corporate restructuring. But there has been relatively
little to date. Rather it’s been the other way around.
‘We have the largest, or second largest life/actuarial business, for
instance. We expand and we have not too many players moving into our areas.
Whether that will continue, only time will tell.’
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