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.
In 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.