PracticeAccounting FirmsIs there room for one more?

Is there room for one more?

Could another large firm emerge to take on the Big Four and so reconstitute a Big Five?

It’s a tough question and feels a bit like asking whether your local chemist
will ever compete with Boots. Sure they provide similar services – but who’s in
every high street the length and breadth of Britain?

But don’t think the question isn’t discussed. It’s a big issue for the Big
Four in their talks with regulators nervous about the lack of choice among
global auditors, and a tough issue when it comes to resolving conflicts of
interest.

Don’t think investors are not concerned either. It’s part of the reason why
they are taking such a keen interest in the future regulation of the audit
profession.

As all this interest percolates, the question that cannot be ignored is how
do you find another firm that provides a viable alternative to the biggest four
firms in the world?

The gulf between the largest four and the next firm is enormous. There’s
roughly £600m in turnover standing between Grant Thornton and the smallest Big
Four firm E&Y.

That’s only on a UK basis. Scale it up to the international level and imagine
the gulf that must be crossed. It’s not just about turnover. It’s about thorough
integration that would leave a client in no doubt that wherever he went in the
world, he would encounter the same firm.

As enthusiastic as Grant Thornton and BDO Stoy Hayward are to take business
away from the Big Four, we should not confuse that with an ambition to join them
at the top table.

Growth at this magnitude would require massive investment, and as a very
senior auditor pointed out to me, that’s very difficult to achieve in a
partnership structure. They’re just not suited to that kind of enterprise. The
big firms have taken decades to evolve to their current state.

But is it, therefore, too wild a thought to imagine a company floated, say,
on the London Stock Exchange building a global professional services business
that would compete directly with PricewaterhouseCoopers, Deloitte, KPMG and E
&Y?

Maybe it’s just a fantasy, but if it happens, remember you heard it here
first.

Gavin Hinks is deputy editor of Accountancy Age

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