Interviews with the leaders of firms featured in Accountancy's 2002 survey of international firms and networks produced a groundswell of optimism that post-Enron regulation would force multinationals to think again about their nearexclusive relationships with the Big Four.
Martin Burchmore, head of Kingston Sorel International, the global network of Kingston Smith and ranked number 32, said there were already signs that national subsidiaries were being given greater flexibility in their choice of firms.
Compulsory audit rotation and other measures to end close relationships would open the eyes of finance directors in global companies to the range of major firms capable of offering services at local and international level.
The public revelation that Andersen was not a single global company had come as a shock to many investors who might now be less enthusiastic about enforcing 'Big Four everything' on multinationals, said other senior partners.
They believe the shrinking of the Big Five to the four, coupled with restrictions on auditors doing non-audit work, will lead to a new approach by major companies which in the past automatically focused on the biggest firms in awarding work.
Geoff Barnes, chief executive of 10th ranked Baker Tilly International, said: 'We will be able to do very well out of the void created in public perceptions by recent events. We certainly don't underestimate the power of the Big Four; these are very serious professional people. But companies are already saying to us: “Let's try you.” If we perform we will get the work.'
Grant Thornton, ranked 6th, said it was finding companies, considered too small by the big players, preferred to stay with the firm that had helped them into international markets. Head of International Services, Andrew Godfrey, said the firm's corporate finance practice was now operating across its global network.
The Big Four, who dominate the table, were sceptical about the claims from their smaller rivals. 'It sounds like good spin but I don't think we are suffering,' said one senior Big Four source. 'In fact we have been busy picking up new clients and new business.'
The survey shows that Pricewaterhouse-Coopers is clearly the largest global firm with revenues of $22.3bn, close to twice the global revenues of its nearest rival Deloitte Touche Tohmatsu.
Andersen has been omitted from the table this year following the collapse of the firm. As Andersen partnerships around the world have forged new alliances with local Big Four practices around the world they have taken business to the Big Four which will boost their revenues. On the facing page we attempt to show the impact of these new revenues on the host firms.
The figures before adding new former Andersen business show that PwC grew revenues globally by 7.7%, with the fastest-growing Big Four member Deloitte Touche Tohmatsu up by 10.7% to $12.4bn. KPMG International saw a 9.3% growth to $11.7bn with Ernst & Young up 7.3% at $9.9bn. This year's fastest growing network was London-based AGN International, ranked 12th, with a 44.9% rise in revenues. Most of the growth is accounted for by the merger with smaller global network TAG in January.
But John McCuin, managing partner of UK member AGN Shipleys, said strong underlying growth in member firms had helped the total. His own firm, which specialises in television and film and in financial service compliance work had seen a 13% rise in fee income.
Second fastest developer was Morison International, also headquartered in London, which saw its revenues rise by 21.4%. Maurice Fitzpatrick of member Tenon said the addition of nine new firms partly explained the growth, but he too attributed part of the increase to good feeearning by firms focused on owner-managers.
Also growing strongly was Eura Audit International/Charter Group Partnership who between them added 11 new firms and pushed revenues 20.2% higher to $244m ranking them 29th in the table.
The biggest reduction in revenue, 17%, was suffered by US-based ACPA International (35th). No one was available for comment at ACPA International head office in New Andover, Massachusetts. ACPA, which has affiliates in 40 countries, and added six new member firms in the last year in Australia, China, Guatemala, India, Nigeria, and Tunisia.
The only other network to report a reduction in revenues this year is French-based Groupe Constantin which added three new member firms in France and one in the Netherlands while seeing revenues fall from $193m to $186m. Through non-members who are affiliated to the network, Groupe Constantin claims a presence in 90 countries through a total of 490 offices. The group is ranked 31st.
Who benefitted from Andersen's demise?
The collapse of Andersen has seen its partners and the value of their business transferred to other members of the Big Four. Although official figures are not available, Accountancy has used publicly available figures to estimate the impact on the firms.
The biggest beneficiary looks set to be Deloitte Touche Tohmatsu which is likely to see global revenues rise from $12.4bn to $15.5bn, significantly closing the gap on PricewaterhouseCoopers in our annual table. PwC looks likely to gain least from the Andersen break up adding only $130m to global earnings.
Ernst & Young can expect to see its $9.9bn worldwide revenues rise to $11.9bn while KPMG International can look forward to a far more modest $800m increase. Grant Thornton is expected to add a useful $130m in new fee earnings in the US where 53 Andersen partners will join the firm.
Deloittes have picked 324 ex-Andersen partners in the US and Canada with fee earnings of almost $800m while KPMG have added 200 worth an estimated $490m. In Latin America Ernst & Young (97 partners worth $140m) and Deloittes (177 partners worth $255m) have divided most of the spoils.
Deloittes did best in Europe picking up 1,011 partners in the Denmark, Italy, the Netherlands, Portugal, UK, Spain, Sweden and Switzerland and almost $1.9bn in fees. Ernst & Young have added 344 Andersen partners in the Asia Pacific region boosting potential fee earnings by almost $570m.
Approximate new position when Andersen revenue is divided
1. PricewaterhouseCoopers: $22,430m
2. Deloitte Touche Tohmatsu: $15,500m
3. KPMG International: $12,600m
4. Ernst & Young: $11,900m
International Accounting Firms and Networks
|Network||UK member firm||Fee income||% change||Countries||Offices||Member firms||Partners||Prof staff||Year-end|
|Deloitte Touche Tohmatsu*||Deloitte & Touche||12,400||(11,200)||10.7||140||-||-||-||95,000||30.5.01|
|Ernst & Young||Ernst & Young||9,861||(9,194)||7.3||130||670||-||5,777||57,645||30.6.01|
|BDO International||BDO Stoy Hayward||2,203||(2,010)||9.6||98||589||88||2,168||15,412||30.9.01|
|Grant Thornton Int'l*||Grant Thornton||1,790||(1,744)||2.6||109||652||-||2,270||21,879||30.6.01|
|RSM International||RSM Robson Rhodes||1,632||(1,588)||2.8||65||565||64||2,065||11,547||30.9.01|
|Horwath International||Horwath Clark Whitehill||1,447||(1,339)||8.0||80||375||-||2,161||12,956||31.12.01|
|Moores Rowland Int'l||Moores Rowland||1,380||(1,265)||9.0||92||646||170||2,118||12,486||30.9.01|
|Baker Tilly International||Baker Tilly||1,208||(1,111)||8.7||58||448||106||1,651||9,623||30.6.01|
|Nexia International||Smith & Williamson||1,189||(1,041)||14.2||72||241||99||1,312||9,821||30.9.01|
|AGN International||More than one member||933||(644)||44.9||76||448||182||1,205||8,657||31.10.01|
|Moore Stephens Int'l||Moore Stephens||687||(628)||9.4||82||445||259||1,395||8,289||31.12.01|
|Kreston International||More than one member||642||(575)||11.7||66||349||176||982||5,312||30.10.01|
|IGAF||More than one member||551||(493)||12.0||64||366||138||969||669||31.5.02|
|MacIntyre Sträter Int'l||Haysmacintyre||550||(500)||10.0||85||235||207||1,300||4,000||31.12.01|
|BKR International||BKR Haines Watts||506||(471)||7.4||61||288||121||886||5,713||30.9.01|
|CPA Associates, Inc||MacIntyre Hudson||505||(440)||14.8||45||235||107||610||3,660||31.12.01|
|Morison International||More than one member||453||(373)||21.4||51||300||163||934||4,442||31.12.01|
|Mazars*||Mazars Neville Russell||436||-||-||50||150||-||-||5,000||-|
|DFK International||Chantrey Vellacott DFK||392||(371)||5.7||72||294||192||770||3,964||30.9.01|
|SC International||Saffery Champness||319||(290)||10.0||49||182||96||525||3,369||31.12.01|
|Urbach Hacker Young Int'l||Hacker Young||276||(258)||7.0||43||122||49||406||2,382||31.12.01|
|Polaris International*||More than one member||254||(250)||1.6||41||102||54||205||1,462||31.12.02|
|INPACT||More than one member||252||(251)||0.4||60||196||152||680||2,500||31.12.01|
|MGI International||More than one firm||245||(236)||3.8||70||200||138||575||2,259||30.6.01|
|Eura Audit||/Charter Grp More than one member||244||(203)||20.2||38||-||142||578||3,235||31.12.01|
|IA International||More than one member||219||(208)||5.3||70||183||130||521||2,538||31.12.01|
|Groupe Constantin||More than one member||186||(193)||-3.6||23||109||52||139||1,585||31.12.01|
|Kingston Sorel International||Kingston Smith||181||(176)||2.8||46||101||44||295||1,656||30.9.01|
|GMN International||Morley Scott||155||(146)||6.2||35||118||48||282||1,858||31.12.01|
|Russell Bedford International||More than one member||147||(140)||5.0||35||71||46||312||1,651||30.6.01|
|ACPA International||More than one member||131||(158)||-17.0||40||148||79||336||1,552||31.12.01|
|Euro Defi EEIG*||More than one member||-||(403)||-||15||407||292||750||-||30.9.02|
|Alliotts*||More than one member||-||(306)||-||63||200||159||-||5,000||31.12.01|
|Affilica International||More than one member||-||-||-||22||42||41||124||-||31.3.02|
Figures have been rounded up to to the nearest $m. PwC - Revenue figures are taken from press releases. Deloitte Touche Tohmatsu - Figures taken from website and are approximate. Staff figure is for all staff. Grant Thornton - Figures are taken from website and are approximate. Mazars - Figures taken from website and are approximate.
Staff figure is for all professional staff. Revenue figures converted from Euros. Polaris, Euro Defi - Forecast figures. Alliotts, Fidunion - Figures taken from website and are approximate.