Kreston North European Conference
Update on strategy
and current developments
22- 24 May 2008, St Petersburg
Jon Lisby, Executive Director
Agenda
 Overall performance in 2007
• Analysis of our growth
• Our current resources
• How do we compare?
 Referral performance
• Regional analysis
• A change in the fee basis
 Network v Association
- What’s our strategy? Where on the line?
 Now, where, how
Another outstanding year
$1.708bn Growth 30%
$1,708bn
$1,317bn
$1.128bn
$990m
$836m
$642m
2001
2002
2003
2004
2005
2006
2007
Resources
236 (213) firms, 665 (543) offices 92 (75)countries, 18,500 (15,000) staff
665
485
509
448
18,348
543
10,979
9,843
7,760
7,400
Partners
Total Staff
Offices
1138
2003
1128
2004
1,043
2005
1,138
2006
1167
2007
2007 Recruitment
 Moscow
 Brazil – 2 firms
 Dominican Republic
 Ukraine
 Vietnam
 Isle of Man
 United Kingdom
 Guatemala
 Mexico – 3 firms
 Australia – 3 firms
 15 new firms
and ……….
Exco France
 France
•
Poland
 Africa (former E&Y)
•
West Indies, New Caledonian
and Reunion
•
•
•
•
•
•
•
•
•
•
•
Côte d’Ivoire
Gabon
Niger
Mauritania
Congo
Togo
Benin
Mali
Burkina
Cameroon
Tchad
•
Morocco
 Over 2,000 professionals
 Fee income US$203m
Analysis of growth
 30% growth comprised
• 15% impact of recruitment less retirements
• 15% average organic growth
 Overall organic growth in line with Big 4
 Recruitment of Exco France brings improved balance
between Eurafne and North America
 North America now 49% previously 60%
 Eurafne now 41% previously 29%
Regional strength/recruitment targets
(Source: International Accounting Bulletin Surveys 2007)
Membership
analysis
National
position
2007
Kreston
Growth
Average
Growth
Fee
Revenue
Kreston
%
Offices
Partners
Total
Staff
%
%
US$m
%
No.
No.
No.
USA
12
7
14
836
49
153
305
6649
UK
18
26
13
100
6
23
96
891
Australia
14
46
15
31
2
11
34
251
Germany
17
6
8
79
5
27
55
658
Canada
23
10
11
10
1
5
12
88
China
7
30
23
56
3
59
50
1,590
Netherlands
9
6
7
74
4
20
45
697
France
7
1200
8
194
11
109
139
1,794
Italy
17
-19
11
5
6
6
59
Russia
10
122
49
27
6
12
615
Middle East
16
8
19
6
16
15
208
Mexico
11
95
4
12
1
27
49
501
277
16
203
349
4,347
1,707
100
665
1,167
18,348
Other
World Total
15
30
20
2
Regional analysis
Region
2008
%
2007
Fees No of
US$m Firms
%
Fees
US$m
No of
Firms
Asia Pacific
6
110
34
7
93
35
Australia/New Z
2
33
13
2
27
13
697 146
29
Eurafne
41
387 125
Latin America
(reunited)
2
23
33
2
20
30
North America
49
845
10
60
791
10
Total
100 1708 236
100 1,318 213
The Top 10
( Green up - Red down)
Place
International affiliate/firm
Most recent year's fee income ($/m)
Growth (% )
1
PricewaterhouseCoopers
25,200
15
2
Deloitte Touche Tohmatsu
23,100
15
3
Ernst & Young
21,104
15
4
KPMG
19,810
17
5
BDO International
4,704
20
6
Grant Thornton International
3,500
25
7
RSM International
2,998
11
8
Praxity (Merger MRI / Mazars) (10)
2,839
-
9
Baker Tilly International (8)
2,501
9
Horwath International (9)
2,424
12
10
How do we compare?
Place
International affiliate/firm
Most recent year's fee income ($/m)
Growth (% )
11
Nexia International (13)
2,310
54
12
Moore Stephens International (11)
1,883
22
13
HLB International (12)
1,729
14
14
PKF International
1,723
17
15
Kreston International (16)
1,708
30
16
Leading Edge Alliance (17)
1,613
21
17
Fiducial International
1,357
4
18
AGN International
1,317
14
19
DFK International (21)
877
22
20
Mazars
874
-
Strength of membership
• Kreston International at start of 2008
• 30% Growth takes us to – 15th ($21m from13th!)
• 92 countries
• with 665 offices
• 18,500 staff and
• fee income of US$1.7bn.
2008 Recruitment to date
 Belarus
 Cyprus
(thanks to IEI !)
 Bulgaria
 Mexico – 6 firms
 Central America
 India
•
•
•
•
Panama
El Salvador
Honduras
Nicaragua
 Venezuela
 Colombia
International referrals
Past 10 years – Value 1997/2007
80
70
 Strong growth in value of
reported new referrals
60
 US$1.4m in 2007
50
40
30
20
10
0
1998
2000
2002
2004
2006
 88% between Europe and
North America
 Still too low!
Referral fees – a change
 10% payable by receiving firm
 5% receivable by giving firm (in respect of referrals given
after Jan 08 and only payable if paid)
 Adjusted on annual fee subscription
 2 years only
 No fees due on national referrals from 2007
Network v Association
Network definition…………….
A larger structure:
 That is aimed at co-operation; and
 That is clearly aimed at profit or cost sharing or shares common
ownership, control or management, common quality control policies
and procedures, common business strategy, the use of a common
brand-name, or a significant part of professional resources
Both IFAC and European 8th Directive
Association - Network
Client acceptance & sign off rules
Service lines Global strategies
Ongoing quality monitoring
limited
imposed
Shared working practices
Joint
Brand shared
purchasing
Forum of Firms
Pro-active joint targeting of
prospects
Special interest groups
More about status
than international
business
Social and
Travel club
Technical
support &
Training
Profile attracts
staff & clients
incl. PI insurance
Network definition
 The Kreston strategy?
Which option?
• Networks within an Association
Network definition
 All Kreston members are required to make amendments
to
 any document, stationery, website, signage or promotional
material and
 eliminate the word “network” and
 at all times refer to a “global association of independent
accountants and business advisors”.
Now?
 15th ( or equal 13th!) largest global group
 Low central cost structure maintained
 Referrals between members driven by client needs –
mainly reactive and little co-ordination of working
practices
 Excellent global coverage and strong growth but with
• Some location gaps
• Need to strengthen service line capability in certain locations
 Brand recognition – low but growing
Where to?
The strategy remains…………..
“High profile association (including some networks)
working in closer collaboration to proactively win multi
national assignments and compete more effectively in the
marketplace of mid-tier accounting networks”
The challenge
 Raise the profile
 Increase collaboration
 Proactively target quality international
assignments
 And win!! Both national and international
The challenge
Raise the profile
• Continued growth and admission of new strong firms
• National and regional business development plans
The challenge
 Increase collaboration
• Introduce the tools
- Global web portal - unlimited users
• Share working practices
• Share information – extended Fact Sheet
• National and regional development strategies
(Examples – Mexico,India,Australia/New Zealand)
• Build multi-firm teams
- Special interest groups (“SIG”)
Building collaboration
• Special interest groups
Numerous groups including:•
•
•
•
•
•
Global audit
Global Risk and Advisory (Internal audit, Sarbox)
International tax
Transfer Pricing
Corporate finance – IPO’s, Acquisitions, Due Diligence
Global Payroll
Building collaboration
• Global audit
An update on progress
• Proposal made at Chicago World Conference in October 2007 by MHM
for a “branded” global audit network
• Objective – to complete more effectively against BDO, GT, RSM etc
• Many members interested
• No agreement to brand from major North American and European firms
• Discussions ongoing and focused on increasing capability to target, win
and efficiency service quality transnational audits
• Las Vegas Conference –June 2008
• Our goals remain …………..
• Build cohesion and
• Accelerate the growth of high quality referrals both
national and international
• Build the value of Kreston firms and
• Do more and better business with people you know, like and trust!
Eurafne Conference
Hamburg, 18 -20 September 2008
World Conference