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Accounting Firms Taking Large Market Share of Consulting Contracts, Business and Industry Trends Analysis

Consulting work is a vital component of the overall business strategy of accounting firms.  In fact, each of the biggest accounting firms generate more revenue from consulting services than the total revenues at the largest management consulting firms, such as McKinsey & Company, Boston Consulting Group (BCG) and Bain & Company.
Since the demise of accounting giant Arthur Andersen, LLP, the global accounting industry has been reduced from the Big Five firms to the Big Four, which together account for the vast majority of the audits at publicly held companies worldwide.  These accounting giants are PricewaterhouseCoopers, Deloitte, EY and KPMG. 
History—The divestiture of accounting firm consulting units:  During the early 2000s, regulators and financial leaders became concerned that a lack of accounting objectivity could occur when a firm bills a client as much for consulting services as it does for financial auditing.  All major accounting firms except Deloitte divested themselves of their general consulting units in an effort to stave off any possible conflicts of interest.  The fact that there was a rash of accounting scandals, including the infamous 2001 failure of the energy company Enron, added fuel to the fire.
PricewaterhouseCoopers sold its consulting business, PwC Consulting, to IBM for $3.5 billion in 2002.  It was then incorporated into IBM Global Services, one of the firm’s fastest growing and most important units.
KPMG Consulting was spun off from its accounting firm parent as a freestanding company, which acquired the new name of BearingPoint.  With 15,200 employees and 2008 revenues of $3.19 billion, BearingPoint was one of the world’s largest consultancies.  However, the firm elected to take Chapter 11 bankruptcy protection in February 2009.  The company was a victim of both the global economic slowdown and a heavy debt load (around $1 billion) made unmanageable during the global credit crunch.  Accounting problems had also taken their toll on the company, which is ironic considering it was an offspring of an accounting company many years ago.  In 2009, BearingPoint sold the majority of its North American public services business to Deloitte for $350 million, its commercial services business to PricewaterhouseCoopers for $44 million and its Europe, Middle East and Africa practice to its European management team for $69 million.  BearingPoint also sold its BearingPoint China Consulting unit to Perot Systems Corporation in 2009.
Ernst & Young, in early 2000, agreed to merge Ernst & Young Consulting with Cap Gemini, a well-established global firm noted for IT consulting, among other practices.  The merged company changed its name to Capgemini.  (Accounting firm Ernst & Young Global Limited changed its name in 2013 to EY.)
Accounting & Consulting Today:  Accounting firms are once again operating giant consulting practices.  The Big Four accounting firms in the U.S. (Deloitte, PwC, EY and KPMG) are generating vast revenues from consulting and advisory services.  At first, the focus was specialized consulting relating to Sarbanes-Oxley and other compliance needs.  More recently, however, accounting firms expanded their consulting operations.  PricewaterhouseCoopers (PwC) acquired management consulting firm Booz & Company in 2014, changing the acquired firm’s name to Strategy&.  During 2000, Andersen Consulting had the good fortune to be spun off from the now defunct Arthur Anderson accounting firm to become the free-standing Accenture.  Today, Accenture is a 742,000-employee consultancy with offices and operations in 120 countries.  Fortunately, Accenture was already well distanced from its former parent company, Arthur Andersen, before its demise.  Today, Accenture remains one of the world’s most successful consulting firms.  
Starting in mid-2023, the Big Four were laying off some of their consultants as growth in the consulting industry slowed.  This is partly a result of aggressive hiring during the Coronavirus pandemic when many clients sought guidance and expertise in business transformation.  KPMG, for example, laid off about 5% of its advisory, tax and back-office consultants in June 2023.  In April 2023, Deloitte let go 1.5% of its staff and EY 5%.
Second-tier accounting firms, such as BDO USA, LLP (formerly BDO Seidman LLP), Grant Thornton International and RSM US LLP, have historically served smaller clients since they do not have the employee counts or prestige often needed to serve companies with vast revenues.  However, with the enactment of enhanced government regulation of public company financial disclosures, tier-two accounting firms are successfully bidding on audits for major corporations, since the Big Four initially had a limited number of auditors available to handle the increase in hours necessary for compliance.  The shift opened doors for smaller accounting firms, especially for BDO USA (a member of the BDO International group of firms).
Over the mid- to long-term, rapidly evolving operating environments, client needs and global trade patterns will create massive opportunities for consultancies with appropriate specialties and capabilities.  Government regulations and their enforcement can arise quickly and create big challenges for business.  Good examples are government focus on consumer privacy and consumer rights protection, global trade issues, environmental issues and government attempts to limit apparent anti-competitive practices or business conditions.  Firms involved in social media, artificial intelligence, intellectual property (such as pharmaceuticals research) and internet search engines have all faced recent onslaughts of government inquiries and regulatory changes.


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