© copyright 2009 h4 partners: all rights reserved. global market trends and the importance of...

© Copyright 2009 H4 Partners: All rights reserved.

Global Market Trends and the Importance of Branding

Alan Hodgart

15th October, 2009

Nexia International

© Copyright 2009 H4 Partners: All rights reserved.2

Firms operating in the upper end of the accountancy market are segmented clearly by size

Source: World Accounting Intelligence; H4 Partners Analysis

Tier 1 Tier 2.1 Tier 2.2

A very clear leading group followed by a less defined second group of firms


There is also a clear difference in revenue per professional between the Big 4 and the chasing pack


Tier 2.1 Tier 2.2Tier 1


The dominance of the Big Four is causing concern□ Clients express concern about a lack of choice – see the Big Four as a somewhat

undifferentiated oligopoly□ Regulators are concerned about the impact if one fails – or approaches failure

There is a significant size gap to the next group of firms □ Mainly operate in the mid-market□ Are (generally) somewhat ‘looser’ organisations than the Big Four

Key issue is the ability (and willingness) of the second group to compete further up the “size/value chain”

□ Thereby providing an ‘alternative’ that closes the gap to the Big Four - but without creating a Big Five (plus)

A second issue is to defend their position against attacks by the Big Four□ In both client and resource markets

Large corporates complain of lack of choice - but do not see the second tier as an alternative

□ Quality is patchy - especially internationally□ Lack the experience in managing large, global audits□ Do not present themselves as cohesive organizations

The market for accounting services is in a state of flux at present


Consolidation below the Big Four will continue

Already underway: Mazars and Moores Rowland; Robson Rhodes and Grant Thornton

The size differential between the Big Four and the second tier can be bridged only by merger

□ Although size isn’t the only issue□ Quality global coverage and global project management skills are ctucial

There is a grey area at the lower end of the second tier□ A group of ‘groups’ likely to fall into a ‘third tier’ position

A large number in a ‘third tier’ position already□ All working around a smaller corporate position□ Audit of lower importance - focused more on accounting services, tax and other

services (payroll etc)□ Some offer a form of management consulting and business advisory services

A clear second tier will emerge - probably double the present size of a group/network□ But will only be 5 or 6 firms or networks□ Focus on mid cap Corporates for Audit and Tax plus growing owner managed

businesses for Business Advisory services and Tax - and UHNWI □ Others will move down to the third tier - increasing competition at this level


The second group can be divided into “upper” and “lower” based on revenue generation


Tier 2.1 Tier 2.2


But the same segmentation does not apply when revenue per professional is considered


Tier 2.1 Tier 2.2

Several in the “lower” group produce higher revenue per professional than the members in the “upper” group


Within Nexia there are some clear differences in relative size across member firms

Note: Ranks are based on Revenue of firms in Tier 2.1 and Tier 2.2



In Australia/Asia Nexia’s practices are consistent in relative size – albeit just below average in the group



Rank Australia China Japan

1 BDO BDO Horwath

2 PKF Grant Thornton Grant Thornton

3 Grant Thornton HLB Kreston

4 Horwath Kreston PKF

5 Baker Tilly Baker Tilly RSM

6 RSM Leading Edge Alliance BDO

7 Moore Stephens Horwath Nexia

8 Nexia Nexia Baker Tilly

9 HLB PKF HLB

10 Praxity Moore Stephens Moore Stephens

11 Kreston Praxity Praxity

12 Leading Edge Alliance RSM Leading Edge Alliance


Compared to its peers Nexia’s size in the major European markets are above average – With a couple of peaks



Rank France Germany Italy Spain United Kingdom

1 Praxity BDO Praxity BDO Grant Thornton

2 Kreston Nexia BDO Grant Thornton BDO

3 Grant Thornton Grant Thornton PKF Praxity Nexia

4 Baker Tilly Moore Stephens Baker Tilly Horwath Baker Tilly

5 HLB RSM Moore Stephens Moore Stephens PKF

6 Nexia PKF Nexia Kreston Moore Stephens

7 RSM Praxity HLB Nexia HLB

8 PKF Baker Tilly Kreston RSM RSM

9 Moore Stephens HLB RSM Baker Tilly Kreston

10 BDO Kreston Grant Thornton PKF Praxity

11Leading Edge Alliance

Horwath Horwath HLB Horwath

12 HorwathLeading Edge Alliance

Leading Edge Alliance




Nexia’s US presence is relatively small compared to its peers



Rank Brazil Canada Mexico United States

1 Grant Thornton Grant Thornton Kreston RSM

2 BDO BDO Nexia Leading Edge Alliance

3 Praxity Horwath RSM Horwath

4 Moore Stephens Baker Tilly Moore Stephens Praxity

5 Baker Tilly Praxity Grant Thornton Baker Tilly

6 RSM RSM BDO Grant Thornton

7 Nexia PKF HLB BDO

8 Horwath Nexia PKF Kreston

9 HLB HLB Baker Tilly Moore Stephens

10 Kreston Moore Stephens Horwath HLB

11 PKF Kreston Praxity Nexia

12Leading Edge Alliance



PKF


Clients with cross border needs tend to be relatively sophisticated, experienced in dealing with a range of professional advisors: Their experience usually covers a

range of different types of international networks - some good, some bad

They are not so much concerned with the arrangements between members - but they need to be assured that the network can deliver the right quality and on time

A core client to one member must be a core client everywhere

The aim is to create a sense of a consistent service throughout the network No matter which office a client is dealing with they know it is ‘one firm’

One point of contact - who can make things happen anywhere in the network

Consistent practice strengths across the network - a similar position in each market

Consistent service delivery standards - everyone in the network meets the client’s expected requirements

Consistent documentation and processes - demonstrating a one firm approach and efficiency

Able to move people between locations as required

People know each other and can speak about their colleagues in different locations

There are consistent views among sophisticated clients about what they expect from an international professional services network


In order to meet the clients’ needs some organizational requirements are necessary – Which in turn leads to a strong brand

There can be no financial or other organizational barriers to referring work between members

There needs to be a Management/Coordinating body with agreed decision powers And a means of ensuring that members implement what is decided

Strong levels of communication and information sharing throughout the network

Brand


A brand is a guarantee to the client

The client knows what to expect from the service/product through the brand

Independently of when and where the service/product is purchased

The brand “promises” a number of things

Quality

Product/Service; Delivery; Price for quality

Consistency

Over time; In different geographical regions; within practices

A brand is more than just “a name” - it is what the name conjures up

The promise behind the brand is the key

Important that the ‘brand promise’ be capable of being delivered throughout the network before a common brand is promoted

Inconsistencies will damage the brand - build brand and capabilities simultaneously

A brand is a promise or guarantee to the client (1/2)


Nexia: “Delivering a consistent quality of service and local expertise on a global scale”

BDO: “…consistent seamless service worldwide … through common methodologies and shared IT platform”

GTI : “A cohesive global organization.”

PKF: “…seamless continuity of service globally”

Praxity: ”…unmatched client service and quality solutions globally”

Moores Rowland: “…professional excellence with consistent high quality service standards…”

Baker Tilly: “…international teamwork and outstanding client service…”

RSM: “ …close relationships between members - work together …highest quality service to clients…”

Horwath: “ …impeccable quality and highly integrated services to clients globally…”

A brand is a promise or guarantee to the client (2/2)


What market position should Nexia aim for going forward?

Core clients?

Core services?

Competitive advantage?

Geographical coverage?

What level of consistency exists throughout the Nexia network today?

Clients?

Practices?

Reputation?

What improvements are required given where members wish to compete?

There are a number of strategic questions that need to be answered going forward (1/2)


Does Nexia want to be a loose network of best friends or a truly integrated network as part of a leading group of ‘business focused’ firms?

There are a number of strategic questions that need to be answered going forward (2/2)


Ensuring a network that can provide a consistent and seamless service demands a high level of commitment to the strategic vision

A growth in size for many members - probably by merger

A focused strategy to move up the value chain in many local markets

Tighter central management - able to achieve high levels of consistency - a sacrifice of some local autonomy

Investment in building consistent systems and processes across the network

Willingness to participate in various global initiatives

Movement of people between firms

Focused on building local client with global needs rather than waiting for inbound referrals - an attitudinal issue

Inbound referrals are a consequence of active participation

There are a some significant issues to address if ‘Nexia’ wishes to compete in the second tier


Quotes

Source: Accountancy Age; The Independent; H4 Partners Analysis


Alan HodgartTel: +44 (0)20 7152 6125Email: [email protected] of all or individual slides of the presentation are permitted, provided proper attribution to H4 Partners is made.Reproduction of individual charts or displays is not permitted.

H4 Partners Limited29 Farm StreetLondon W1J 5RLUnited Kingdomwww.h4partners.co.uk

© copyright 2009 h4 partners: all rights reserved. global market trends and the importance of...

Documents