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Big Four Sees Big Growth in US Consulting Market

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Jul 1st 2015
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The Big Four accounting firms outperformed the US consulting market in 2014, posting growth of 12.8 percent to $17.5 billion in revenue, in part because of a strong commitment to acquisitions, according to a new report from global consulting market analysts Source Information Services.

According to Source, in the US market alone, more than a quarter of consulting acquisitions in the past 27 months involved accounting firms. The United States accounted for almost half of global mergers and acquisitions (M&A) activity last year, keeping consultants busy with work ranging from due diligence to post-merger integration.

“We think M&A will be really an explosive source of growth in the next 12 to 14 months. Clients are more active, are fending off more competition, entering new markets, and are exploiting new technology,” Thomas Puthiyamadam, US management consulting leader for PricewaterhouseCoopers (PwC) LLP, said in a written statement.

Globally, revenues from PwC's advisory practice increased by 10 percent to $10 billion US dollars in fiscal year 2014, doubling the advisory practice's revenues in the past five years and making up 29 percent of the Big Four firm's total global revenues, PwC announced last October.

Overall, the consulting market in the United States nearly reached double-digit growth, increasing by 9 percent to more than $50 billion last year, according to Source.

“Consulting budgets expanded across most sectors as clients threw off the conservatism of the last few years, eager to grow, get things done, and maybe even start taking risks again,” said B.J. Richards, senior editor at Source and author of the report.

The fastest-growing sector within the consulting industry was financial services, which posted an 11.9 percent increase to $12.4 billion in revenue in 2014. Driving the majority of that activity was regulation, according to the report, but there's also a growing amount of consulting work associated with digitization, which is driving demand for consultants across every function and in every section.

“Financial services companies are asking themselves how they're going to grow in the future,” said Lynne Doughtie, head of the fast-growing advisory business at KPMG LLP who will become the Big Four firm's US chairman and CEO on July 1. “They still face regulatory and cost pressures, but they pulled almost all the levers where efficiency is concerned, and they now have to look at how they can improve their top line. Our role is to bring innovation, as clients are looking for this.”

Last December, KPMG announced that its global advisory revenues grew in FY 2014 by 10.4 percent to $9.09 billion US dollars, up from 6.5 percent in FY 2013. In the Americas, the firm's advisory revenues increased by 15.1 percent last year.

According to the Source report, financial management and risk grew by 11.8 percent to $16.2 billion in 2014, in large part due to cybersecurity moving up the corporate agenda in recent years. In addition, technology services increased by 8.9 percent to $12.7 billion. Source predicts this growth will continue as more than three-quarters of US clients (76 percent) said their technology spending will increase over the next 18 months.

The report also found that risk-reward contracts, where consulting fees are aligned to project outcomes, are striking a chord with value-conscious US clients.

“To relieve price pressure, we do more value-based billing,” said Ken Hutt, a principal at Deloitte Consulting LLP. “It's probably easier for us to offer that as a big firm. We're able to make the economics better for the client until they are able to see the impact.”

Revenues for consulting, the largest business among the Deloitte member firms, grew 10.3 percent globally in FY 2014; 11.3 percent in the United States alone, Deloitte announced last September.

Advisory services for Ernst & Young (EY) LLP grew 14.4 percent globally in FY 2014, EY announced last September.

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