Deloitte 2006 revenue hits $20 billion
William G. Parrett, Global CEO, Deloitte Touche Tohmatsu, in releasing the Deloitte Touche Tohmatsu Worldwide Member Firms 2006 Review, announced US$20 billion aggregate member firm revenues for fiscal year 2006, which represents a growth rate of 11.5 percent in local currencies. He also made it clear that more consolidation and change within professional services is likely as mid-sized firms strengthen their capability and capacity, so as to expand their base of globalizing clients. Mr. Parrett made his comments as he welcomed more than 500 new partners of Deloitte member firms in Buenos Aires.
The CEO of Deloitte said, “One current debate frequently confuses competition and concentration. Concentration has allowed the firms to increase their size and scale resulting in improved audit quality and actually more capable firms to choose from for companies of varying sizes and stages of development. Even among the largest and most global of companies, the market choice is better than it was before the Big Eight firms consolidated in the nineties.”
He continued, “Competition is rife among the very large networks, the result of their similar size, scale and financial strength, as is the case in other segments of the market. There might be consolidation, but competition is strong.”
According to Mr. Parrett, consolidation will continue to occur among the small and medium-sized firms, driven again by client demand, the same market influence that drove consolidation among the biggest firms over the past couple of decades.
“As small to medium-sized businesses, as well as national enterprises, continue to regionalize and globalize, the medium-sized professional services firms, and this includes the largest of these, will find ways to build their capability. This means more consolidation, which will be good for audit quality and the reliability of financial information,” Mr. Parrett said.
Mr. Parrett also dismissed arguments that the Big Four should be broken up, suggesting instead ways to enhance competition among the largest firms and in the long term, provide more choice. These include: changing independence rules that can act as inhibitors; promoting principles-based accounting, reporting, auditing and oversight systems; ensuring a reasonable level of security for audit firms; and fostering career development for auditors by maintaining multiple service offerings by firms.
For 2007, Mr. Parrett predicted even stronger revenue growth. “The plan is to grow aggregate member firm revenues 12.5 percent next fiscal year, but on the basis of a continued strong global economy, they should exceed this,” he said. Deloitte is on track to do this. In aggregate, member firm services, like financial advisory, and consulting are exceeding targets, growing at approximately 20 percent and 17 percent, respectively. Tax is also exceeding expectations, growing at more than 12 percent.