Horwath International’s medium-term goal is to climb from its position as the ninth-largest global accounting network in terms of fee income into the top seven within four years. “To achieve that we would have to be one of the top ten in Europe. It’s basically what we are committed to,” the network’s regional director for Europe, the Middle East and Africa, Bernard Delomenie, told IAB.
This month, Horwath secured a sizeable new French network of 12 firms called Horwath Partenaires France. Despite the addition, Delomenie said, the network is only the 13th largest in Europe – a contrast to its position elsewhere in the world. The network’s US representative, Crowe Chizek, is the country’s seventh largest. In the key markets of China and Australia, Horwath member firms are fifth, and a recently secured Russian firm is estimated as seventh largest in the country.
Breaking into the European top ten will not be easy for Horwath because most of its competitors are based in the UK. Delomenie said: “It is therefore very difficult for our member firm in the UK, Horwath Clark Whitehill (HCW), to become as big as our global competitors are. HCW is very good and growing, but they cannot compete in size with BDO, [Grant Thornton] or Baker Tilly in the UK, and considering the importance of the UK in the profession, we need to compensate in the rest of Europe.”
A good year The addition of the new French network comes on the back of a good year of recruitment for Horwath International. In the past 12 months the network added Australia-based WHK Group, Greek audit firm SOL – which Delomenie said audits about 60 percent of the Greece’s stock exchange – and the new member in Russia.
The Russian and Greek representatives are not yet full members of Horwath International and don’t carry the network’s name. Delomenie explained that this is due to Forum of Firms requirements and will change when the new representatives’ audit methodology is fully compliant with the rest of the network for transnational clients. “We are spending a lot of time training people [in Russia] and we believe it is going very well. It is the fastest-growing Russian firm today,” Delomenie said, adding that the largest Horwath client in the world is Russian oil giant Rosneft.
Other developments from the past 12 months include the reorganisation of Swedish firms and a new addition in Tanzania. Horwath also expects to announce a large signing in Dubai soon. “This firm is number five or six in the [United Arab Emirates] and Oman. It is a very big firm and it will totally change our position in the Middle East,” Delomenie revealed.
The current recruitment focus for the network includes the Baltic region, Serbia, Bulgaria and Central Asian countries such as Kazakhstan, Uzbekistan and Kurdistan. The network is also looking to increase its presence in Italy, and northern and western Germany. Delomenie said growth could come from a combination of organic growth and merger and acquisitions: “We would be always willing to look towards other firms, but we believe we have very strong foundations now in the key markets – the UK, Germany, France, Italy, Spain and Russia. We have very good firms in those six countries, we are happy about it, and we want to grow around that. If other people approached us, they would have to discuss with our current member firms.”
Horwath International chief executive Frank Arford says that Horwath is in growth mode. “We’d like them to get in the position of getting recognised as market leaders,” he said. “We’re trying to work towards good strategic alignment of our large firms in terms of which market segments they are going to focus on and alignment in terms of allocating resources to build speciality consulting areas. We also have an initiative we call the demand creation initiative and that has two purposes. One is to help, through training, our member firms become more effective at generating business. The second is to help them really create within their firms a formal sales management process so they know the prospects in their new business pipelines and they’re tracking them and working on them.”
Middle market focus Internationally, the network’s strategy is to focus on serving clients in the middle market and, in some cases, larger clients. “We would like to be able to deliver those services across borders anywhere in the world to those middle-market clients,” Arford said, adding that speciality areas include international tax, risk consulting and corporate finance.
Horwath International believes it falls under the International Federation of Accountants’ definition of a ‘network’. Arford explained: “We already have created common standards, but through training and inspections we are working hard at having all of our member firms follow and apply the common standards. We’re not quite there yet, but I’d say that we’re making really good progress. In 2008 we were able to become a full member firm of the Forum of Firms. That took quite a lot of work in 2007, so that was one indication of that fact that we want to have worldwide standards.”
With membership of the Forum of Firms secured, focuses in 2008 include identifying how to comply with the independence standards for assurance and developing prospects for speciality services.
The new French representative, Horwath Partenaires France, is a national network that was formed from two previous groups – former members of the Constantin network plus Didier Kling and Associates, Dauge & Associés and Fidelio. The member firms’ combined fee income of about €40 million ($58.2 million) in 2007 includes revenues of €20 million from in and around Paris. Horwath says the network is placed within the top ten groups registered with the French regulator to perform statutory audits in the country.
Delomenie said there is “very good chemistry” between the firms: “We believe it is going very well. There is a very good momentum and we believe it will grow even more.”
Marc de Premare is a member of the Horwath Partenaires France executive committee and is in charge of international relations within Horwath International. He was also a partner at Horwath’s previous representative, Constantin, before it merged with Deloitte France. There were two reasons why de Premare decided to stay with Horwath. The first was to provide a continuity of services to clients and the second was to continue a “strong relationship” with many of the Horwath member firms throughout the world. “I also wanted to leverage on the growth of the Horwath network, being one of the key pieces of the new organisation in France,” de Premare said.
On the hunt The key targets for the new firm in the year ahead will be sharing expertise within working committees and recruiting new member firms for the French network. de Premare said the network is looking for new members in specific geographic locations, as well as ones that can add areas of expertise. Other criteria are that firms have strong positions in their regions, partners with a willingness to co-operate and an independent strategy for their own firm.
Another challenge will be increasing Horwath’s brand recognition in France. It is quite low at present because Constantin did not carry the Horwath name, de Premare said.
Brand recognition is not just an issue for Horwath in France. The US member firm – Crowe Chizek – also does not currently carry the Horwath name. “They’re working hard on [adopting the Horwath name],” Arford said. “It’s a difficult process in the US, they literally have to apply in all of the 50 states and it’s taking a lot of time… they’ve been working on that for nine months, trying to go through all 50 states, but they’re making good process and I think they’ll be finished up this summer some time.”
The US firm is also trying to build its geographic presence on the East and West Coasts. Arford said Crowe Chizek will look for well-established firms and there are also plans to expand coverage in the western provinces of Canada.