KPMG was the second largest firm in the country until Andersen collapsed as a
result of the melt down caused by its involvement in the Enron crisis. Deloitte
promptly took on the Andersen staff and clients and much of its revenues,
pushing KPMG into third among the Big Four firms. Dramatic enough, you may
think, but even more so when you consider KPMG had been in talks to take on
Andersen but backed away after getting the jitters over the potential legal risk
The decision to back out was made by Mike Rake, the then UK senior partner,
who some four years later, when leaving his post as chairman of KPMG
International, confessed that failing to take on Andersen was his single biggest
failure while leading the firm.
With that merger KPMG would have been in contention to overhaul
PricewaterhouseCoopers as the largest UK accountancy practice. As it is however,
the firm managed to deliver impressive growth. Results for the year ending June
2006, show revenues at a little more than £1.4bn following a 14% year on year
rise. The firm has 556 partners with around 7,900 professional staff.
It has not been untouched by controversy itself. In 2005 the firm’s US arm
agreed to pay a £250m fine after being pursued by the government for the sale of
fraudulent tax shelters. Papers released in 2007 show that senior figures in the
firm had argued that if it faced indictment on the charges it could have killed
the firm throwing tens of thousands out of work and creating a crisis in audit.
Since last year the firm has been run by John Griffith-Jones who is now UK
chairman and senior partner. He has already made his mark by merging the UK
practice with its sister operation in Germany, meaning partners from both
countries now draw their profits from the same pool. It was seen as a
trailblazing move and a strategy that the other big firms might follow.
Having said that KPMG has its roots in Europe. The firm was formed in 1987
through the merger of Peat Marwick International and Klynveld Main Goerdeler,
bringing together firms that had their origins in England, Scotland, New York,
on the one side, and Amsterdam and Germany on the other. Then followed the
creation of KPMG Audit plc to undertake public audits.
The firm’s international reach rivals any of the other Big Four firms, but in
the UK it runs in third for the number of FTSE250 audit clients (57) though
second behind PwC when it comes to the FTSE 100 with 23 clients. KPMG has
focused on the AIM, running joint first with Grant Thornton (167). If you look
at the stock market as a whole though KPMG has more audit clients than anyone
else with 394, overtaking PwC in recent months.
In terms of business KPMG has been vocal in pushing the green agenda and has
made plain its intention to turn the issue into a serious advisory service. In
recent years it has also capitalised heavily on the switch to international
accounting standards and made some headway at dominating advice on internal
controls as a result of the Sarbanes Oxley Act.
It was one of the first of the Big Four to divest itself of a consultancy,
for fear of conflicts of interest, but that is a service line that is coming
back strongly. Revenue now stands at around £240m, up around 28% year on year.
Though still the firm’s biggest earner at more than £420m, audit almost stood
still for the firm with only 2% growth in the last set of accounts. But
corporate finance is a good earner with revenues now at £300, a hike of 15%.
Culturally KPMG is seen as one of the most supportive and friendly places to
work while retaining its professional image. It has been a public champion of
diversity and made much of the fact that it is interested in talent, whatever
its origins or gender. Indeed it is a mark of the environment KPMG has managed
to create that it has profession’s only openly gay board member, Ashley Steel.
It has also made time for staff members to dedicate working to putting something
back into the community and all this while being focused on excellence at work.
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