The International Accounting Bulletin (IAB) survey has revealed the sector grew by 6% in 2012, down from 8% in 2011, due to pressure on fees in the light of increased regulatory scrutiny and intense competition.
Market share remained relatively unchanged for the Big Four, which accounted for 67% of the $165.4bn taken in fees, with Deloitte only $210m behind PwC’s $14.9bn total.
The gap between third-ranked Ernst & Young and fourth-placed KPMG has widened to $1.4bn, compared to only $170m in 2011. The report cites KPMG posting only a 1% increase in revenues, and reporting later in the year as reasons for the increase.
Outside the Big Four, BDO remains in fifth place in the rankings, followed by Grant Thornton, RSM, Baker Tilly International, Crowe Horwath International and Nexia.
According to the report, 2012 saw a surge in M&A activity among the larger mid-tier networks, including the BDO International merger with PKF International’s firms in Australia, China and the UK.
Firm leaders interviewed for the survey predicted mergers of equal significance to continue in 2013.
Ana Gyorkos, data and analysis editor of IAB, said: “Continued fee pressure, squeezed margins and the increasing cost of standard and regulatory compliance has led to increased M&A activity. Especially in the developed markets, M&A is the only way of significantly increasing market share, particularly for mid-tier networks, and increasing margins as well as provide an alternative to the Big Four.”
Firms saw continued pressure on audit & accounting services, with advisory – and to a lesser extent tax – being the service lines bringing in organic growth.
The survey also found that the ongoing UK Competition Commission inquiry, EU audit reform discussion and US Public Company Oversight Board debate on mandatory rotation is affecting global client behaviour.