The world’s third largest professional services network is to
combine the operations of its member firms across Europe, the
Middle East, India and Africa (EMEIA) into a single business
unit.

In a major and unprecedented global restructure, Ernst & Young
(E&Y) has approved the combination of 43 European firms into a
single legal entity and will further integrate operations in the
Middle East, Africa and India where legally possible.

Ernst and Young: global restructureIn a separate move, 700 E&Y partners in Asia
have also approved the integration of 15 firms in the Far East Asia
region.

E&Y Global told IAB the large-scale restructure was
motivated by a desire to mirror the globalisation of clients and
industry in general. The MEIA practice will be an $11.2 billion
organisation and comprise of about 60,000 people. It will be led by
a single executive team implementing a shared strategy. Within
EMEIA, there will be 13 sub-areas that will have parallel
management and governance structures. Costs and investments will be
shared across the region.

E&Y added: “All 3,300 partners across EMEIA will have the same
approach to performance evaluation and compensation. The partners
will be employed in the local legal entities and the profits will
be earned and people paid by those local entities”.

By comparison, the current largest firm in the world is Deloitte
US, which has a workforce of 50,000 staff and reported fee income
of $9.8 billion in the year ended May 2007.

E&Y UK chairman Mark Otty, who is also E&Y’s area managing
partner of the Northern Europe, Middle East, India and Africa, has
been nominated to lead EMEIA. Although approved by the network’s
global executive and council, 3,300 partners within EMEIA will vote
on the integration by the end of May and, if passed, the new
practice will be effective from 1 July 2008.

The integration of the Far East Area creates a $1.2 billion
organisation, with more than 20,000 people. Notably, the
restructure excludes E&Y’s Japan member firm and does not span
down to Australasia. The new structure will also be effective from
1 July 2008. David Sun and Jim Hassett have been confirmed as Far
East co-area managing partners.

E&Y said the integration will allow it to better risk manage
practices in the hope this will prevent any large-scale lawsuits
affecting firms across the region. “The legal structures proposed
are designed to support our business objectives while providing a
level of protection against legal risk to our practices and
partners,” E&Y said. “The separate legal nature of each member
firm in the area will be respected and clients will continue to do
business with local country legal entities. Each member firm will
also continue to maintain its own professional indemnity
insurance.”

Big Four firms have recently combined individual firms but such
large scale integration across continents is a bold new move. KPMG
merged its UK, Germany and Switzerland firms to create KPMG Europe
while Deloitte’s UK office combined with Deloitte
Switzerland.

In response to the E&Y’s restructure, rival
PricewaterhouseCoopers Global (PwC) said it has operated on a
regional basis for many years, including its 20-country Western
Europe structure, a 26-country Eastern European partnership, and
African and Middle East practices. PwC said it would focus on
business and organisational strategies, which provided the best
service to its clients, rather than wide-scale legal
integration.

Deloitte said it has no plans to change its legal structure
although it does consider it from time to time.

Arvind Hickman