1. finance
2. accounting and auditing

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Partnership survey Accounting
Wednesday 25 March 2015
www.afr.com | The Australian Financial Review
AFR
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Edited by Agnes King: [email protected] Twitter: Agi_King
Mergers and advisory
growth changes firms
Accounting Partnership survey
Graduates hired by firm
Change
446
450
Deloitte
301
328
EY
Analysis
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Agnes King and Edmund Tadros
Rampant consolidation and the
growth of advisory services has
swollen the ranks of Australian
accounting partnerships, and changed
the composition of firms.
Aggressive acquirers Deloitte and
PwC added the most partners in the
2013-14 financial year among top-tier
firms. Deloitte, which bolted on eight
acquisitions during that period,
increased partner numbers by 9 per
cent to 577, according to The Australian
Financial
Review
Accounting
Partnership Survey. Deloitte uses a different definition of partner.
PwC’s partner numbers swelled by 5
per cent to 470, helped along by three
bite-sized acquisitions. Chief executive
Luke Sayers said ‘‘organic growth has
been the main driver of partner numbers across all of our businesses.
‘‘Acquisitions have played a part,
albeit to a lesser degree, as have strategic lateral hires, where the right person has become available,’’ he said.
Looking ahead, he expects organic
growth to continue as the biggest determinant of partner numbers.
EY and KPMG partner numbers
remained relatively static in the 2013-14
financial year at 407 and 395
respectively.
EY
and
KPMG’s
acquisition
strategies kicked in shortly after the
survey period closed. The fiscal 2015
snapshot will look markedly different.
The notion that these are tax, audit
and accounting firms is now redundant. KPMG Australian boss Gary
Wingrove said roughly half FY15
income will come from advisory services, a trend closely mirrored at other
big four firms.
EY boss Tony Johnson said maintaining the spirit of partnership
becomes challenging as firms get larger and more diverse.
‘‘It’s a real drive of mine because it
creates engagement, which translates
into exceptional client service,’’ Mr
Johnson said.
While large accounting partnerships
have progressively adopted elements
from the corporate world, new Deloitte
chief executive Cindy Hook feels they
are still a superior structure for harnessing the potential of entrepreneurial individuals.
‘‘There is something about having
your main stakeholders in the tent with
you,’’ Ms Hook said.
Having 400-odd owners of the business does make running a partnership
more challenging from a leadership
perspective than a listed entity. It
requires a heightened level of alignment and shared vision.
Mid-market firms are also branching
out into complimentary consulting services, such as talent management.
It can be a struggle, admitted outgoing Grant Thornton chief Robert
Quant.
‘‘Clients will categorise us back into
what we’ve always done,’’ he said.
However, Pitcher Partners national
chairman Don Rankin said, ‘‘this is
changing fast’’.
‘‘Clients are looking for us to do a
whole lot more,’’ Mr Rankin said.
PwC partners bring in the most revenue per partner, an average of $3.34
million for each of the firm’s 470 partners as of 2013-14. Next is KPMG, where
each of the 395 partners brings in an
average of $2.84 million. This is followed by EY, where the 407 partners
bring in an average $2.78 million each.
Deloitte remains the accounting firm
with the largest partnership of 577
Organic growth has
been the main driver
of partner numbers
across all of our
businesses.
Acquisitions have
played a part, albeit
to a lesser degree, as
have strategic lateral
hires.
Luke Sayers, PwC chief executive
numbers by seven or eight per cent,
through a series of mergers.
The survey highlights the extent to
which big ticket liquidation work is tailing off and the insolvency sector has
begun its cyclical contraction.
‘‘We had five solid years post global
financial crisis, the last 18 months have
been more subdued,’’ said PPB Advisory chief executive Stephen Purcell.
‘‘Markets are normalising. We knew
it was coming but it came upon us
more quickly than we thought,’’ said
Mr Purcell.
KordaMentha, PPB and rival
McGrathNicol have reduced professional staff numbers (excluding partners), Korda by 4.5 per cent, while
McGrathNicol shed 39 per cent of its
workforce.
Despite this, and the added inconvenience of New York listed conglomerate FTI Consulting biting a chunk out
of its Brisbane practice, KordaMentha
grew partner numbers by 13 per cent,
to 42 in the 2013-14 financial year.
Alternative revenue streams is the
simple explanation. Founding partner
Mark Korda said less than 50 per cent
of KordaMentha’s workforce operate
in the traditional insolvency space.
Roughly 40 per cent of income now
comes from forensic engagements, real
estate advisory, investment management, and due diligence on mergers
and aquisition, he said.
Poor leadership and lack of direction
took its toll on partner ranks of listed
accounting aggregator Crowe Horwath, which contracted by nearly 8 per
cent to 213 in fiscal 2014. This was prior
to Crowe’s takeover by financial service
company Findex.
Rival ASX-listed roll up Countplus
also bore the brunt of instability in its
ranks, with partner numbers numbers
contracting 13 per cent, to 64, due to a
divestment of a Perth subsidiary, a
restructure in Canberra, as well as
some retirements. A Countplus spokeswoman said there had been ‘‘only a
very small number of genuine exits’’
which were replaced by ‘‘a few new directors in the last year’’.
Q
q
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For interactive graphics, go to
afr.com/business/accounting
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Golden era
Accounting partnership survey
2012-13 2013-14
Total
total
total
partners partners partners
(% chg)
(no)
(no)
Deloitte*
Pricewaterhouse
Coopers
529
447
2012-13 2013-14 Revenue
per
Revenue Revenue
partner partner partner
(% chg)
($m)
($m)
+9.1
Deloitte
2.06
2.01
-2.4
470
+5.1
Pricewaterhouse
Coopers
3.29
3.34
+1.6
577
EY
402
407
+1.2
EY
2.79
2.78
-0.1
KPMG
393
395
+0.5
KPMG
2.83
2.84
+0.1
Crowe Horwath/
Findex
231
213
-7.8
Crowe Horwath/
Findex
1.76
1.85
+5.3
BDO
159
159
0.0
BDO
1.42
1.49
+4.3
Grant Thornton
139
137
-1.4
Grant Thornton
1.60
1.65
+2.7
Pitcher Partners
82
89
+8.5
Pitcher Partners
1.97
1.92
-2.9
RSM Bird
Cameron
1.70
1.68
-1.0
HLB Mann Judd
1.11
1.19
+7.7
1.16
+3.9
-15.9
RSM Bird
Cameron
83
89
+7.2
HLB Mann Judd
82
78
-4.9
Nexia Australia
80
78
-2.5
Nexia Australia
1.11
Bentleys
58
72
+24.1
Bentleys
1.19
1.00
William Buck
61
69
+13.1
William Buck
1.40
1.31
58
-6.9
PKF
63
68
+7.9
PKF
1.24
1.25
Countplus
74
64
-13.5
Countplus
1.28
1.50
+16.9
KordaMentha
37
42
+13.5
KordaMentha
3.11
2.74
-11.9
McGrathNicol
32
31
-3.1
McGrathNicol
2.97
2.71
-8.7
Ferrier Hodgson
27
29
+7.4
Ferrier Hodgson
Hall Chadwick
15
13
-13.3
Hall Chadwick
PPB Advisory and Moore Stephens declined to take part in the survey
*Deloitte uses a different definition of partner ^Not disclosed
ND^
3.66
ND^
3.03
–
-17.4
SOURCE: FINANCIAL REVIEW
+120.7%
128
118
99
Grant Thornton
69
76
Pitcher Partners
-16.1%
2012-13
2013-14
+10.1%
Nexia Australia
55
61
+10.9%
RSM Bird Cameron
58
56
-3.4%
39
43
William Buck
HLB Mann Judd
Hall Chadwick
Ferrier Hodgson
43
11
28
20
+10.3%
PwC, Deloitte, EY
and KPMG hired
almost 1400
graduates between
them in 2013-14.
Note: Only firms that disclosed graduate numbers are listed.
n/a
n/a
-28.6%
SOURCE: FINANCIAL REVIEW
KPMG starts selfie
interviews for grads
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Recruitment
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Agnes King and Edmund Tadros
Graduates hoping to grab one of 300
jobs at KPMG in the next month will
have to traverse an online game overlaid with psychometric tests that the
accounting giant will use to filter
10,000 applicants before recruiters
look at a single resume.
It’s a radical break from tradition
and part of a broader effort to snare top
talent faster than KPMG’s rivals, as
graduate intake at the big four
accounting firms gets set to rebound
this year after dropping off in the 2014
financial year.
The big-four accounting firms –
PwC, Deloitte, EY and KPMG – are
among the nation’s top graduate
employers.
They hire almost 1400 graduates
between them in 2013-14, according to
The Australian Financial Review’s
Accounting Partnership Survey.
The biggest recruiter was Deloitte,
which took on 450 graduates in
2013-14.
EY took on 328 new starters, up from
the previous year’s group of
301 recruits. PwC dropped back
slightly, taking on 324 compared to 341
in the previous year.
KPMG scaled back graduate recruiting dramatically, cutting the number
hired in 2013-14 to 291, down from 369
in the previous year.
Overall, graduate intake across the
big four was down nearly 5 per cent.
But 2015 should see firms make up lost
ground.
KPMG has ceased rolling recruitment this year, meaning that rather
than continuously hiring grads
throughout the year, most of its intake
occurs between February 23 and
April 12.
Some 10,000 job-seekers are expected to apply for graduate positions at
KPMG in this six-week window. Just
3 per cent, about 300, will be offered
jobs. EY has also boosted its graduate
intake in 2014-15, hiring 402 students. It
plans to up this again in the 2015-16 financial year, making room for 471 grads
and 418 vocationers.
KPMG wants an edge as the competition for talent hots up. Applicants will
traverse an online game environment,
overlaid with psychometric tests
developed by Revelian, which it
expects will filter 60 per cent of candidates before KPMG’s recruiters look at a
single curriculum vitae.
The new self-service paradigm aims
to make KPMG’s recruitment process
faster, more efficient and a more positive overall experience for candidates.
‘‘We turn a lot of people down. Every
candidate will become a client or a
competitor so it’s important everyone
of them has a great experience with our
brand whether they get a job or not,’’
KPMG national head of recruitment
Nikki Harrison said.
Last year, 27 per cent of graduates
who made it to final-round, face-to-face
interviews at KPMG were offered a job.
This year, KPMG recruiters believe
they’ll be able to offer about 80 per cent
of that group jobs, by making it a
smaller pool, populated with more
suitable candidates.
In the old regime, KPMG tested
applicants for logical reasoning,
numerical and verbal skills. In the
brave new self-service world, it also
tests the way candidates prioritise tasks
and make decisions.
Pay hikes ‘normal’ for newbies
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+1.0
-21.1%
291
Crowe Horwath / Findex
partners as of 2013-14, up from 529 in
the previous year.
But growth has brought down the
average revenue per partner at Deloitte
which is just more than $2 million
each.
This is well behind the big accounting firms and behind smaller firms
such as Hall Chadwick ($3.03 million
revenue per partner), KordaMentha
($2.74 million revenue per partner) and
McGrathNicol ($2.71 million revenue
per partner).
Mergers and acquisitions have had a
substantial impact on the construct of
mid-market accounting partnerships
too.
William Buck’s national network of
independent accounting firms added
the most partners, up 13 per cent to 69
on the back of strong organic growth
and a merger in Victoria with Bell Partners.
National chairman Nick Hatzistergos expects the network to generate combined revenue of $90 million,
up 15 per cent this financial year, with
organic growth contributing 10 per
cent and the rest resulting from its merger with Priestley & Morris in Sydney
and Flood Allen in Adelaide.
Pitcher Partners, Bentleys and RSM
Bird Cameron all increased partner
-5.0%
369
KPMG
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+9.0%
341
324
PricewaterhouseCoopers
+0.9%
Salaries
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Agnes King
A salary bump is on the cards for threeto five-year trained accountants, as the
financial sector starts hiring again and
the offshoring of junior roles by big
accounting firms in the wake of the financial crisis comes back to bite.
‘‘Multinational corporations headquartered in Europe and the US have
dramatically slackened hiring restrictions,’’ Michael Page regional director
Adrian Oldham said. ‘‘This has con-
sequently released the handbrake on
hiring at their domestic subsidiaries.
Demand for newly qualified chartered
accountants is certainly on the
increase.’’
Salary increases of $10,000 to
$15,000 were ‘‘quite normal’’, he said.
Helen Argiris, national chairwoman
at mid-market accountancy firm BDO,
has seen the impact of resurgent
demand in the commercial sector. She
has seen offers up to 25 per cent more
in terms of annual salary.
‘‘We haven’t seen that for a few
years,’’ she said.
AFRGA1 A039