The five years from 2004 to 2008 have been some of the best growth years for these firms. In a strong economic environment, with rapid development in the BRIC nations and solid growth in emerging markets, the Big Four firms capitalized on demand for global financial and accounting services to boost their top line and posting a string of back-to-back record performances.
Growth in Brazil, Russia, India and China was reported at nearly 30+ % each year, as these economies expressed their latent need for professional services.
In 2008, the combined revenues of the Big4 firms, Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers crossed a major landmark – the $100 billion barrier. 2008 revenues were a solid $103 billion, up 15.4% from 2007, and capping a streak of sequential double digit revenue increases each year since 2004, when the combined revenue was only $60 billion.
The Asia region for the Big Four firms nearly doubled from 2004 to 2006, and Asia’s share of total revenues increased from 12% to 13% in this period. Surprisingly, the European region continues to be the largest geographic region for the Big Four firms. Europe accounted in 2008 for 48% of total combined revenues, up from 46% in 2004. America’s share slipped considerably, dropping from 42% of combined total revenues in 2004 to 39% of combined total revenues in 2008. Highly-developed countries of US and Canada had more modest needs for professional services provided by the Big Four firms.
The traditional mix of the Big Four firms moved slightly away from pure audit to more tax and advisory services as they increased revenues at a faster clip. By service line, combined Audit revenue for 2008 was $53 billion, 52% of the total combined revenue, slipping 2% from its 54% share in 2006. Combined Tax revenue was $25 billion, 25% of the total in 2008, rising 2% from 23% in 2006. Advisory services accounted for $26 billion, 25% of total in 2008, rising 2% from 23% in 2006.
The Big4 firms employed a staggering 590,000 professionals in 2008, increasing from 435,000 in 2004, providing a net employment increase of 155,000 in just five years. In 2008, of this, there were 33,580 global partners, 443,522 professionals and 112,817 administrative personnel. Partners are placed atop a steep pyramid in these firms, partners comprised only 5.7% of total employees, professionals being the bulk at 76% and support staff comprising the balance at 19%. The Big4 firms continue to push the professionals to partner ratio, which has increased sharply from 11.1 in 2004 to 13.2 in 2008. Not only do partners manage a larger set of professionals, they are also expected to bring in larger chunks of client business, with revenue per partner rising from $2.1 million in 2004 to $3.1 million in 2008.
KPMG’s financial year ended in September 2008, a full one quarter after the other firms, and it felt more the crushing weight of the global financial credit crunch. Despite this, its revenue increased 15.4%, somewhat slower than Ernst & Young and Deloitte & Touche, but creditable nonetheless. PricewaterhouseCoopers continues to be the largest firm by revenue, with Deloitte close behind by only $800 million, conceivably Deloitte could become the top dog in a short while if it keeps up its strong rate of growth. Thus, 2009 promises to be an interesting year both for growth prospects and for gaining the top spot.
Undoubtedly, as a group, the Big Four firms occupy a significant position on the global economic landscape, with $100+ revenues, high profitability, deep global reach and as a large employer of highly talented professionals. This year has provided us with quite unbelievable numbers and the party does not seem to be over yet.
Source: Big4.com
Fortune Magazine announced its version of TOP 100 BEST COMPANIES TO WORK FOR.
