Efforts by the big four professional services businesses to gain a bigger share of the audit work for family enterprises are paying off as they almost completely dominate the accountancy work for the world’s biggest family businesses.
Research by Family Capital found that 80% of the top 500 family businesses in the world use one of the Big Four - PWC, KPMG, EY and Deloitte - for their audit work. Only 7% of the top 500 use smaller accountancy groups for their audit work. The remaining 13% did not disclose which audit firm they use.
PWC topped the list with 24.8% of the 80%, followed by EY with 21.1%, KPMG with 17.8%, and lastly Deloitte with 16.2%.
All the Big Four have sharpened their focus on family businesses in the last 10 years. This trend is due to the growing importance of family enterprises in the global economy and the shrinkage of public markets, where the big non-family businesses are mostly located. Although it’s difficult to put a figure on it, 20 years ago many of the top 500 family businesses would have used local and smaller accountancy firms for their audit work. Today, as the figures show, they increasingly use one of the Big Four.
And all of the Big Four are continuing their efforts to gain a bigger share of the audit and advisory work for family businesses. PWC has recently made the family enterprise world a big priority in its efforts to win more business over the next three years. Recently, as part of this commitment, PWC hired a team of family business advisors from EY, which included the heavyweight advisor, Peter Englisch, who is now PWC’s global leader for family business.
Here’s what he had to say about PWC topping the list of auditors: "At PWC we follow a holistic approach for our family business clients, which includes support to manage profitable growth in these businesses but also preserving family wealth and values while managing the family dynamics and prepare the next generation. I am very encouraged to see these efforts paying off.”
Other initiatives by the Big Four to give greater emphasis to the sector include Deloitte acquired the family advisory group Peter Leach & Partners in 2014, and KPMG hired prominent family business advisory, Ken McCracken in 2015.
“KPMG is very much making family businesses and private capital a big focus. Part of those efforts has recently seen us relocate our global centre of excellence for family business to London from Paris and adding more resource to the centre,” says Ken McCracken, head of family business consulting.
Although the Big Four would be very happy with gaining a bigger share of the audit work for family businesses, it is their advisory work that wins the biggest share of their fees. Indeed, up to 70% of their total fees from the big family businesses come from their advisory work. But, of course, a lot of their advisory work stems from their audit relationships.
For the research, Family Capital used the Family Business Index of the top 500 global family businesses, compiled by the University of St Gallen in Switzerland. Sources used for the audit information included annual reports, company registers like Companies House in the UK and Bundesanzeiger in Germany, and S&P Capital IQ, Factiva, OneSource, and the Bureau van Dijk.