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Finyear | German mid-tier accountancy firms shifting towards consolidation

The latest survey of German accounting firms conducted by International Accounting Bulletin (IAB), the authority on accounting firm data and analysis, finds there is an ongoing change in the German market as appetite to grow strong national firms in this historically, regionally fragmented market intensifies. Factors such as regulatory compliance and audit fee pressures, as well as the need to become international, are among the key drivers leading to large regional firms consolidating to form large national players.

- Germany remains the second largest European accountancy firm market (behind the UK) with €7.3bn fees earned in 2014
- The Big Four firms (EY, PwC, Deloitte, EY) hold 68% of market share with €4.9bn in fee income
- In 2014 EY has taken over KPMG as the second largest German accounting firm
- Large scale consolidation in the mid-tier due to increase compliance cost and fee pressure on audit services

One of the biggest recent movements in the market was the merger between Moore Stephens International member firm RBS RöverBrönnerSusat and Mazars. The newly formed firm will operate as Röver Brönner Susat Mazars for a three-year transition period before it will rebrand as Mazars Germany, becoming fully integrated into the Mazars global partnership model. The move means Mazars will likely become the nation’s 10th largest single firm, a significant improvement from being the 19th largest.

Another recent development was Baker Tilly Roelfs merger with TPW Group, adding 250 employees and 20 partners to Baker Tilly Roelfs's Hamburg office. The merger is likely to bring total annual revenues of €48m ($54m) to Baker Tilly Roelfs, increasing the firm's annual revenue to about €135m. It also moves Baker Tilly Roelfs up in the ranking to become Germany’s 8th largest national single firm.

Leaders of accountancy firms predict a lot more consolidation will emerge in the future, notably due to the growing competitive landscape. Many also believe that this is happening due to new technical and regulatory requirements posing a significant financial burden, which makes it cost-effective to build larger national audit firms.

Changes in Big Four rankings
Germany’s largest accounting firms Big Four (PwC, EY, KPMG, Deloitte) hold 68% of the market share with fee earnings of €4.9bn. However, there was a change in the ranking as EY overtook KPMG as the second-largest accounting firm in Germany in 2014.
EY reported €1,373.4m in revenue in the year to 30 June 2014, up 8% on the year before, while now third-ranked KPMG reported fee income of €1,316m in the year to 31 September 2014.
PwC retained its leading spot with fee income of €1,545.1m, while the smallest of the Big Four – Deloitte - earned €743.9m in fees in the year to 31 May 2014, up 9% on the previous year.

EU audit reform causes mixed feelings
According to the IAB survey, the new challenges arising from implementing the EU's audit reform into German law has left firms with few options other than consolidation to remain competitive in the statutory audit market. Although many firms remain concerned and sceptical about the new rules coming into effect, others – notably recently merged firms – expect big opportunities to arise from the reform.

About International Accounting Bulletin
International Accounting Bulletin is the only global magazine covering the professional services industry. Focusing on business issues affecting firms, networks and associations, it is a trusted source for leading accounting news, as well as vital data and analysis provided by its survey features. Published by Timetric, International Accounting Bulletin tracks fee income and staff information from accounting networks and associations globally, regionally and across most G20 economies, with data spanning back more than a decade.

Les médias du groupe Finyear

Vendredi 10 Juillet 2015

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