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Acquisition Spree for Big Four

October 9, 2015

In my last article, I wrote about the move towards cloud-based accounting and how this change is supporting accountants to work more in a business and financial advisory role. In this article, I’m looking at the string of strategic acquisitions the Big Four have recently made, and what their push into parallel industries means for the accounting profession.

 

Buying relevance

 

It’s no secret that big four accounting firms Deloitte, PwC, EY, and KPMG have acquired a huge number of IT businesses over the last 18 months. In fact, industry experts are questioning the extent to which the four rival firms are transforming themselves into large technology houses.

Of course, big accounting firms pushing into parallel industries is nothing new; it happened with legal services years ago. Nonetheless, the recent push into IT is very significant as the Big Four are acutely aware that survival depends on their ability to reposition themselves for the digital era.

 

What’s the strategy?

 

First and foremost, the spate of tech purchases significantly improves the traditional work of accounting firms. The Big Four aren’t buying anything and everything for the sake of profit. Rather, they’re adding tech expertise to improve much of the work they already do. PwC’s multimillion dollar audit innovation hub, for example, has developed data mining systems that crunch 100 per cent of a company's transactions. The days of taking a random sample and extrapolating its results across the business are gone.

Deloitte, who employs approximately 1500 technology specialists in a total workforce of 6000, has been acquiring small technology groups aligned to key international vendors such as Google and German software giant SAP. Deloitte head of consulting, Robert Hillard, told The Australian Financial Review, "I have a real problem cleanly separating out technology from business transformation in consulting because every single job we do has technology embedded in it".

 

Diversifying services

 

Acquiring IT businesses at the cutting edge of their field also allows the Big Four to sell more services to corporate clients. As revenue is increasingly being driven by growth in advisory services, accounting firms are looking for new ways to sell services to larger corporate clients. The Big Four want to be able to solve any problem their client is experiencing, and purchasing a wide range of tech assets supports the development of those problem-solving skills in-house.

 

When KPMG bought Australian Microsoft partner Hands-On Systems in September this year, the company announced the acquisition would “develop and deliver innovative solutions and services to help clients address their most critical risk, performance and growth issues”. Significantly, that deal was KPMG’s ninth local acquisition in the past 18 months.

 

Eroding the boundaries

 

A consequence of the Big Four’s technology transformation is that accounting professionals can no longer regard themselves as belonging to an isolated discipline. New services are being created through the acquisition of innovative, cutting edge companies, and that means tech expertise is fast becoming a prerequisite for the best accounting jobs.

 

Earlier this year, PwC Australia chief executive, Luke Sayers, said the firm would be increasingly putting science, technology, engineering, and maths “right at the heart” of its strategy. This doesn’t mean that accountants need to be able to write code, but it does mean the Big Four will be hiring more science, technology, and mathematics graduates in the future.

 

What’s the future look like?

 

In light of these changes, a Chartered Accountants Australia and New Zealand report released earlier this year titled, Future Proofing the Profession, forecast what the accounting and finance profession could look like in 2025. When it comes to protecting the interests of clients, the report also considered how well the profession actually understands these new value-creating services that will underpin employment in the near future.

 

The good news is that the report forecast increasing demand for accountants. Unsurprisingly though, it’ll be demand for a breed of accountants with an understanding of economics, IT, strategy, and business process improvement to provide the required expertise. Indicative of what’s still beyond the realm of computers, the report also predicts there’ll be high demand for accountants with social and emotional intelligence, communication skills, and global thinking.

 

It’s been said that of the companies on the Fortune 500 list today, less than one-quarter existed 25 years ago. It’s also estimated that 40 per cent of today’s major corporations will no longer be around in a decade. Innovation is king, and that’s exactly why the Big Four are stealthily acquiring IT businesses at a rapid rate.

Follow Ford Peterson on LinkedIn to keep up to date with all our posts. If you are actively looking for your next job, check out our Candidate Resource Centre which covers many areas from CV writing to guides for interview success.

 

 

Follow Ford Peterson on LinkedIn to keep up to date with all our posts. If you are actively looking for your next job, check out our Candidate Resource Centre which covers many areas from CV writing to guides for interview success.

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