Last year, a 15 percent jump in the consulting area helped Deloitte overtake PwC as No. 1 in total revenues among the big four global accounting and consulting firms, which also include and Ernst & young

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Published September 20, 2011 Reuters
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Print SEPTEMBER 20, 2011 – By Dena Aubin
Email
NEW YORK (Reuters) - Forget struggling economies, aggressive
Share regulators, penny-pinching business clients.
Like 3
The world's two largest accounting and consulting firms are bulking up
with acquisitions and combing the globe for new hires.
28
4 More is at stake than bragging rights. Just as important is cementing
their status as professional service supermarkets, able to help clients in
almost any market where commerce transpires.
"The more they position themselves as a truly trusted one-stop solution
provider to clients, the more they can hope to be more immune to fee
pressures from clients that might increase if the economy worsened,"
said Ashley Newton, associate director at Kennedy Consulting
Research and Advisory.
Last year, a 15 percent jump in the consulting area helped Deloitte
overtake PwC as No. 1 in total revenues among the big four global
accounting and consulting firms, which also include KPMG and Ernst &
Young.
Deloitte claimed the lead by a margin of just $9 million, reporting
$26.578 billion revenues to PwC's $26.569 billion. Prior to 2010, PwC
had been the largest for at least five years, according to data from
Accounting News Report.
ASIA, MIDDLE EAST GROWTH TARGETS
One factor behind the win was Deloitte's decision to hold on to its
consulting arm about a decade ago while other audit firms shed theirs
amid concerns of conflict of interest.
The decision helped Deloitte keep its grip on the high-potential area of
information technology, a business with good growth prospects even in
a dodgy economy. Consulting got a further boost from Deloitte
acquisitions such as the government business of BearingPoint in 2009.
Although regulators in the United States and elsewhere have tightened
restrictions on the consulting services auditors can provide, consulting
has not been prohibited outright, and both Deloitte and PwC have
focused their consulting work largely on companies that are not audit
clients.
Powerful brand names and close ties with C-suite executives, built
partly through audit relationships, have helped make all of the big four
formidable competitors in consulting, according to Gartner Research.
"What the audit work does is allow them to create competence in an
industry," building credibility that is a big plus in pulling in consulting
work, said Gartner analyst Alex Soejarto.
The move into consulting has been going on for some time, partly
because it is far more profitable than mandatory audit work, said Arvind
Hickman, editor of International Accounting Bulletin.
"Audit is labor-intensive and has suffered a lot from fee pressure due to
the global financial crisis."
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4. In close race for No 1, Deloitte, PwC grow apace | Fox Business Page 4 of 6
PwC, which sold its consulting arm to IBM in 2002, has been rebuilding
its consulting muscle with acquisitions such as Paragon Consulting
Group and the commercial services business of BearingPoint in 2009.
Over the past 12 months, it picked up 700 consultants with its purchase
of management consulting firm PRTM and hundreds more through its
acquisition of Diamond Management & Technology Consultants.
Recently it announced it was building its edge in the so-called
sustainability or responsible resource use area, by taking on "green"
business consultant Andrew Winston as an adviser.
Still the worldwide leader in audit revenues, it also has targeted
emerging markets such as India, China and the Middle East to rev up
growth.
Deloitte has bought a slew of consulting firms, including energy
consultants Altos Management Partners and AJM Petroleum
Consultants; performance management advisory firm Jackson Browne;
economic consultancy Access Economics and business analytics firm
Oco. It also beefed up in the sustainability area, picking up Clear
Carbon Consulting and DOMANI Sustainability Consulting.
Full-service clout has helped the firms compete against a range of firms,
from management giants such as McKinsey to technology consultants
such as IBM Corp <IBM.N> and Accenture <ACN.N>.
HIRING NONSTOP
Both Deloitte and PwC have been hiring nonstop.
PwC said its member firms across the globe hired about 45,000 new
staff in the 2011 fiscal year ended in June. Deloitte will not announce its
hires until it releases fiscal 2011 revenue figures, but said it was on
track with a projection announced last year of 50,000 hires a year
globally over the coming five years.
The big four are expected to report their fiscal 2011 revenues in coming
weeks and any significant growth will likely once again be in the
consulting area, said Jonathan Hamilton, managing editor of Accounting
News Report.
"The audit business, while certainly the staple of all these firms, is a
slow-growth business," Hamilton added.
The firms' growth raises challenges, however, such as assuring quality
as their empires expand.
"They are really individual firms that are badged together, but they don't
have a tight centralized control," said Shan Nair, chief executive of Nair
& Co, which advises companies on international expansion and works
with the big four firms.
More worries loom from stepped-up regulatory scrutiny. As consulting
revenues grow, complaints are surfacing again that firms will be
tempted to go easy on audit clients for the sake of winning or keeping a
consulting job -- a charge the audit firms deny.
Last week, European Union lawmakers approved a report that calls for
barring auditors from providing audit and non-audit services to the same
client. The report is nonbinding but could shape a draft law in the works.
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5. In close race for No 1, Deloitte, PwC grow apace | Fox Business Page 5 of 6
PwC and Deloitte both said there was no conflict of interest in the Report: S&P to
Downgrade 'Several'
consulting services they provide. Much of their consulting is done for Eurozone Countries
companies they do not audit and they follow regulators' standards and
companies' own restrictions on the kind of consulting they do for audit
clients.
Greece Debt Swap
Talks End Without
PwC also said it follows a code of ethics set by the International Ethics Deal
Standards Board for Accountants to assure its independence.
Also to the firms' advantage, much of their consulting work -- such as
Stocks Claw Back
helping companies cut costs and become more efficient -- should be in From Heavy Losses,
Still End Down
demand even if the economy slows, analysts said.
"All-in-all, I'd say they're generally taking a pretty prudent approach to
expansion, even if it is aggressive," said Newton at Kennedy Consulting
Research. Show More
More Stories ›
(Reporting by Dena Aubin; editing by Howard Goller and Andre Grenon) BUSINESS SOLUTIONS
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