Deloitte, Ernst & Young, KPMG and PwC: 2012 Revenues Increase to Historic Levels
2012 was a banner year for the Big Four accounting firms: Deloitte & Touche, Ernst & Young (E&Y), KPMG and PricewaterhouseCoopers (PwC) following strong growth in 2011, and erasing the impacts of subdued performance of 2009 and 2010. 2009 combined revenue for the four firms of $94 billion fell 7% from 2008’s record of $101 billion, but stabilized in 2010 as revenue increased 1.4% to $95 billion. 2011 revenue rose a further 9% to historic high levels of $103 billion, setting a new record.
Another new record was set in 2012, with strong growth momentum in all service lines and geographies continuing from 2011, helped by emerging countries, improvements in global economic profiles and increased business deal activity. Combined 2012 revenue for the four firms rose to a record historic high level of $110 billion, up 6% from 2011. With all global economies, except those in Europe, showing continued growth in 2012, the Big Four firms had outstanding performance in 2012, with revenues rising in all geographies, service lines and industries.
KPMG revenues grew the slowest at 1.4%, Ernst & Young at 6.7%, PwC increased 7.8% and Deloitte posted the highest rate at 8.6%. PwC grew slower than Deloitte yet reported 2012 revenues of $31.5 billion, just $200 million more than Deloitte, thus maintaining its leadership position as the largest accounting firm on the planet.
KPMG’s modest growth is well out of line with peers. Our analysis shows three factors: Europe is 50% of global revenues and was negatively impacted by US dollar appreciation versus the Euro, Advisory service line had modest growth and Audit presumably lost some relative market share.
In terms of geography, Americas have 40% and falling share of global combined revenues. From 2011 to 2012 however, Americas had a strong performance growth of 9.2%. Europe has 43% of combined firm revenues and increased 3.3% from 2011 to 2012, growing the slowest due to regional uncertainty. Asian revenues have more than doubled from $7 billion in 2004 to $18.5 billion in 2012, 17% of the total, and grew a strong 8.0% from 2011 to 2012.
By service line, Audit accounts for 45% of total revenues and grew 2.9% from 2011 to 2012. Tax services are 23% of total revenues and also rose 5.6% from 2011 to 2012. Advisory services have been the fastest growing service line for several years increasing share from 22% of total revenues in 2004 to 33% in 2012. Advisory revenues grew a strong 12.2% from 2011 to 2012.
The Big Four firms cumulatively employ more than 690,000 staff globally, with a total of 37,000 partners overseeing a steep pyramid of about 530,000 professionals. Net employment increased by 39,000 from 2011 to 2012.
The outlook for 2013 and beyond is quite optimistic, revenue is expected to grow at a good pace, with help from strong emerging markets, Advisory services, Dodd-Frank and other regulations, conversions to IFRS and favorable economic conditions. 2013 will also prove whether PwC can continue to be the leader and whether KPMG can attempt to narrow its gap with E&Y.
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