Friday June 14, 2024

Accounting giant Deloitte launches biggest reorganisation in a decade to cut costs ‘

Deloitte’s global revenues increased 15 per cent to $65bn in its last financial year

By News Desk
March 19, 2024
Deloitte headquarters can be seen in this image. — AFP/File
Deloitte headquarters can be seen in this image. — AFP/File

LONDON/NEW YORK: Deloitte has launched the biggest overhaul of its global operations in a decade as the Big Four firm seeks to cut costs and reduce the organisation’s complexity in the face of an expected market slowdown, FT reported on Monday.

Under the plan, Deloitte’s main business units will be cut to four — audit and assurance; strategy, risk and transactions; technology and transformation; and tax and legal — from the five the firm has had since 2014.

The reorganisation will reduce costs across the firm, said one person familiar with the plan, but added that a figure had not yet been put on the savings. Deloitte’s global chief executive Joe Ucuzoglu is spearheading the shake-up that will take a year to implement across the more than 150 countries the firm operates in.

In an email sent to Deloitte’s partners on Monday, Ucuzoglu said the plan would reduce the firm’s “complexity” and “free up” more of them to work with clients rather than manage staff internally. Deloitte employs about 455,000 people globally.

Deloitte’s global revenues increased 15 per cent to $65bn in its last financial year, cementing its position as the largest of the Big Four. But after several years of rapid growth, Deloitte, EY, PwC and KPMG are braced for a tougher 12 months as a difficult economic backdrop in key markets prompts companies to cut spending.

The UK consulting market will fail to grow this year for the first time since 2020, according to a new report, which includes input from the Big Four.

The move by Ucuzoglu comes after he last year rejected the possibility of separating its audit and consulting businesses and publicly dismissed the logic of doing so. Rival EY spent more than a year trying to engineer a break-up of the firm before abandoning the attempt in April last year.

In contrast to a typical multinational company, the Big Four are run as a worldwide network of partnerships linked through a global entity that sets the strategy. The global business is funded by fees paid by the local member firms.

The complex structure can make reorganisations fraught with difficulty as partners compete for influence. The reorganisation was “a fairly divisive topic internally”, said one former Deloitte partner.

As part of the changes, Deloitte’s advisory businesses, which advise companies on everything from technology to dealmaking and also includes its tax and legalunit, will be cut to three divisions from four. Its audit and assurance arm will remain as a standalone unit.

Deloitte’s consulting, financial advisory and risk advisory divisions will be brought into two newly created business units: strategy, risk and transactions; and technology and transformation.

The former will house Deloitte’s mergers and acquisitions advisory services that has struggled amid a drought in dealmaking. The technology and transformation unit will bring together its “digital transformation” services, including engineering, artificial intelligence, data and cyber, according to the email to partners, a copy of which was seen by the Financial Times.

In an attempt to eliminate silos, some staff will be transferred to an expanded audit and assurance arm, including those working on environmental, social and governance. Tax and legal will remain a standalone business within the new structure as Deloitte tries to wring benefits from the decision to keep its audit and consulting businesses together.

EY’s break-up plan collapsed because its leaders could not agree on how the tax practice should be divided between the two halves of the business. PwC, meanwhile, has split tax between its advisory and assurance businesses in the US.

“While some others in the market are looking to break this function apart,” Ucuzoglu wrote to partners, “we believe that our fully integrated suite of tax and legal capabilities is a significant source of strength and differentiation and aligns with the needs of our clients.”

The new structure is expected to be in place by June 2025, with member firms starting to implement it as soon as June, according to the email to partners. In a statement Deloitte said the reorganisation would “modernise and simplify” its strategy.