Professional Services Monitor: Today

The Financial Times calls Ernst & Young’s announcement today “biggest shake-up of the professional services industry since the collapse of Arthur Andersen,” and BDO Stoy Hayward managing partner Jeremy Newman says he is “impressed.”

Ernst & Young announced that 87 country practices in Western and Eastern Europe, the Middle East, India and Africa have proposed merging into a single unit, and 700 partners in 15 Far East countries have announced similar plans for another integrated entity.

Ernst & Young today announces that its Global Executive and the Global Advisory Council approved the proposed integration of all of its 87 country practices in Western and Eastern Europe, the Middle East, India and Africa into a new EMEIA Area. It also confirmed that more than 700 partners in the Far East had supported a similar integration across 15 countries and territories.

The EMEIA Area will operate as a single unit, led by a single executive team and, where allowed by laws and regulations, be underscored by formal combinations of practices. The new Area will be a US$11.2 billion organization with more than 60,000 people. The 3,300 partners of EMEIA will vote on the integration by the end of May. The new EMEIA Area will be effective from 1 July 2008.

The integration of the Far East Area creates a US$1.2 billion organization, with more than 20,000 people. The new structure will also be effective from 1 July 2008.

Mark Otty, currently the head of our UK practice, has been nominated to be the EMEIA Area Managing Partner, while David Sun and Jim Hassett were confirmed as Far East co-Area Managing Partners.

This is unquestionably the proverbial “big deal.”  To those outside the business of following the global audit industry, this might come as surprise, presuming that E&Y is E&Y, whether in the UK, UAE or USA.  The true, of course, is that global Big Four are more unified as brands than as legal, corporate business entities. Ernst & Young’s move here puts nearly (estimated) 95% of its fiscal 2007 global revenues into three entities: EMEIA, 53%; US, 36%; and Far East, 6%.  Along with all the other questions specific to E&Y’s challenge—integration issues, risk management, liability—is how the other Big Four will respond.

For those of us who track such things as “professional fees paid to auditors,” February, March and April are hectic months as December fiscal year end companies file their latest proxy statements.  Ames Research Group tracked about 1300 proxy statements and 20F filings during March 2008, and we will probably double that number during April.

Below are some preliminary findings from what we tracked during March.  All summaries are based on companies with $500 million in revenue and greater.

10 Largest Gains in Total Fees (Companies over $500 million) 

Full Chart
 

10 Largest Drops in Total Fees (Companies over $500 million)

Full Chart
 

Average Fees Change, FY06 to FY07 (Companies over $500 million)

Ernst & Young this week took the digital wraps off a new look for its website.  The firm retains the “Quality in Everything We Do” tagline while modernizing its look.  

‘Ernst & Young has strengthened its brand, messaging and positioning, in order to present a more consistent and connected view of Ernst & Young in its interactions with its people, its clients and the wider communities it serves,’ the firm said in a statement.

Accountancy Age first reported the firm’s plans to re-brand in October last year, but this was hotly denied by Ernst &Young’s global press office at the time.

Archive.org has an example of E&Y’s former look from Dec. 2006, and the new look is much improved.  And then there is the first EY.com from 1996, complete with animated GIF.