Deloitte is to plough €200m (£176m) into creating a single North West Europe firm which will bring together a total of eight member firms including the current UK and Swiss operation, which will merge with Belgium, Denmark, Iceland, Netherlands, Finland, Norway and Sweden in a bid to increase its global and regional presence
Deloitte North West Europe will come into effect on 1 June 2017 and will have 28,000 partners and staff, generating over €5bn in annual revenue. The new entity will account for approximately 20% of all revenue within Deloitte’s global network.
Deloitte will invest €200m over the next three years in its capabilities across the region and the new entity will account for approximately 20% of all revenue within Deloitte’s global network, which generates $36.8bn (£28bn) in fee income in fiscal year 2016. In effect, it would generate $7.3bn in merged fee income - the UK and Swiss operation, currently reporting jointly, accounted for £3.04bn (€3.45bn) in the 2015-16 results.
By revenue breakdown, the Netherlands accounts for €663m in annual income, Nordics €767m and Belgium €432m.
The merger was voted for overwhelmingly by partners at Deloitte firms in the Nordic and north west European countries, but it is understood that France, Germany and Luxembourg were not involved in the discussions to create a united European operation, although the long-term ambition is to expand the membership to more European countries.
The majority of the investment funds set aside for the restructure will be invested in people and partners, with no cost reductions envisaged. A Deloitte spokesman told Accountancy that 'the main driver is about serving clients. We are seeing our clients operationg in a global way and it makes sense for the eight firms to work together. Over time, there will be fewer firms globally'.
The final details of the proposed partner profit share arrangements are being finalised at the moment, with plans to 'move towards a single partner profit model to ensure single partner equity across the new firm, although this may not be in place by next June'.
The new set-up will be headed up by David Sproul, Deloitte’s UK chief executive who has been named as the future chief executive of Deloitte North West Europe.
Sproul said: ‘This is a bold move which reflects our growth ambitions. Europe is already the fastest growing region for Deloitte and we believe that by combining across these markets we will further increase the growth potential of Deloitte regionally and globally, as well as our ability to influence positively the growth of our clients.’
Sproul said that as well as combining the capabilities in the member firms to serve globally connected clients, the new firm would also expand career development opportunities for Deloitte staff.
In terms of potential market opportunities, Deloitte cited the depth of the business and private market, with 60 Fortune Global 500 companies, 1,400 $1bn+ companies and a significant private market and family owned sector.
Punit Renjen, Deloitte Global CEO, said: ‘Our strategy is to deliver services to clients as one seamless global organisation. In addition to expanding our capabilities, expertise and insights, our increased scale will enable us to accelerate investments in the types of innovations that transform and advance our clients’ business.’
Globally Deloitte has more than 244,400 professionals at member firms and is ranked as the largest global network.
A similar attempt to create a merged European partnership was tried at KPMG in 2007, writes Philip Smith, although KPMG Europe was disbanded in 2014. At launch in October 2007, KPMG Europe became Europe's largest integrated accountancy firm - 1,100 partners, 17,000 staff, 57 offices and a turnover in excess of €3.5bn (£2.4bn [2007 exchange rate]) merging the UK, Swiss and German operation.
When formed, the 2007 entity became a member of KPMG International, though not a trading partnership itself; client work was still carried out through national practices, which in effect become the operating subsidiaries of the larger firm. Under this framework, partner profits were shared between country firms, but at the time KPMG co-chairman John Griffith-Jones said ‘it doesn't mean that everyone will get the same, we will do it on a pragmatic basis’.
Additional reporting by Philip Smith