We see from KPMG’s website this morning that there is an internal reorganization of its KPMG Advisory Service Line with a new operating model and reducing its currently nine different service lines:
1. Accounting Advisory Services
2. Business Performance Services
3. Corporate Finance
4. Financial Risk Management
5. Forensic
6. Internal Audit, Risk & Compliance Services
7. IT Advisory Services
8. Restructuring
9. Transaction Services
into three larger service groups effective October 1, 2009:
1. Performance & Technology
2. Transactions & Restructuring
3. Risk & Compliance.
According to Global Head of Advisory Alan Buckle, “Our Advisory practice needs to evolve with the market. Our firms’ clients need rapid assistance in three broad areas: how to improve performance — especially by harnessing technology; how to execute transactions and restructure; and how to handle risk and compliance. Our business will now directly align to these needs.”
Changes and reorganizations are not new to the Big4 firms, which have constantly evolving internal structures, groupings and alignments as new leaders bring fresh ideas, ossified structures get revamped and market forces demand appropriate response. The primary reason for this particular one appears to be a combination of external demands and perhaps multiplicity of organizing internal units. This follows a key reorganization at Capgemini with the recent formation of its Global Consulting Unit.
If you look at the other Big4 firms and their internal organization of their Advisory unit, this makes KPMG having the smallest number of divisions. We see the leadership is generally remaining the same with some reshuffling of responsibilities, and we’ll have to see truly in the marketplace if this is a truly different business model with a radical change in its go-to-market or consulting strategy or just a periodic reorganization. Nonetheless, this is still a big change since it affects a multi-billion dollar business unit and around 30,000 employees.
KPMG Advisory is the second largest (32%) of the three groups with $7.3 billion revenues in 2008 and an impressive growth of 13% from previous year. Audit, the largest has 2008 revenues of $10.7 billion and grew 14%, while Tax, the smallest had 2008 revenues of $4.7 billion, but grew a creditable 18%.
In terms of other Big4 firms and their structure of their Advisory units:
PricewaterhouseCoopers - Advisory
1. Strategy
2. Operations Management
3. Human Resources
4. Business Advisory Services consulting.
Ernst and Young - Advisory
1. Actuarial Advisory Services
2. Business Advisory Services
3. Business Risk Services
4. Financial Services Risk Management
5. Fraud Investigation and Dispute Services
6. Technology and Security Risk Services
Capgemini - Consulting
1. Marketing, Sales and Service
2. Finance and Employee Transformation
3. Supply Chain Management
4. Transformation Consulting
Accenture - Consulting
1. Finance & Performance Management
2. Process & Innovation Performance
3. Talent & Organization Performance
4. Strategy
5. Customer Relationship Management
6. Supply Chain Management
Deloitte – Consulting
1. Financial Advisory Services Home
2. Analytic & Forensic Technology
3. Anti-Fraud Consulting
4. Anti-Money Laundering Consulting
5. Business Intelligence Services
6. Business Valuation
7. Capital Projects Consulting
8. Corporate Finance Advisory
9. Corporate Investigations
10. Deloitte Discovery
11. Document Review Services
12. Foreign Corrupt Practices Act Consulting
13. Forensic Center
14. Litigation & Dispute Consulting
15. Real Estate Consulting
16. Reorganization Services
17. Tangible Asset Valuation
Friday, May 29, 2009
PwC Buys BearingPoint Commercial Services, Pays $19 MM More
Another development in the BearingPoint bankruptcy saga, after the finalization of the Federal Services unit sale to Deloitte for $350 million, the bankruptcy court has authorized the sale of the
North American Commercial Services business, including its Financial Services segment and
associated Global Delivery Centers, to PricewaterhouseCoopers (PwC), the highest bidder for this service line. Under the terms of its winning bid at an auction, PwC will acquire the majority of BearingPoint’s Commercial Services unit for $44 million, subject to contractual adjustments. Subject to customary closing conditions, the sale is expected to be finalized by the end of June.
This is actually $19 million higher than the previously announced $25 million number expected on the sale on April 17, 2009, and in BearingPoint’s official press release. It’s not clear why the final price was higher, perhaps due to other bidders in the auction process, or the scope of the units was expanded. If any of our readers have more insight, we would love to hear.
This completes one of the three previously announced intentions of sale to Big Four firms, the others being Federal Services to Deloitte and BearingPoint Japan to PwC Japan. Which leaves the fate of the European and other international units still to be finalized, reports were that internal management teams would try for an MBO, but nothing official as yet on the BearingPoint site.
North American Commercial Services business, including its Financial Services segment and
associated Global Delivery Centers, to PricewaterhouseCoopers (PwC), the highest bidder for this service line. Under the terms of its winning bid at an auction, PwC will acquire the majority of BearingPoint’s Commercial Services unit for $44 million, subject to contractual adjustments. Subject to customary closing conditions, the sale is expected to be finalized by the end of June.
This is actually $19 million higher than the previously announced $25 million number expected on the sale on April 17, 2009, and in BearingPoint’s official press release. It’s not clear why the final price was higher, perhaps due to other bidders in the auction process, or the scope of the units was expanded. If any of our readers have more insight, we would love to hear.
This completes one of the three previously announced intentions of sale to Big Four firms, the others being Federal Services to Deloitte and BearingPoint Japan to PwC Japan. Which leaves the fate of the European and other international units still to be finalized, reports were that internal management teams would try for an MBO, but nothing official as yet on the BearingPoint site.
Wednesday, May 27, 2009
Accenture To Leave Sunny Bermuda For The Emerald Isle
Yesterday, Accenture’s Board of Directors unanimously approved a plan to change its place of incorporation from Hamilton, Bermuda to Dublin, Ireland. This will be put to shareholder vote in the next four months.
First, some history:
Prior to 2001, Accenture operated as a group of more than 40 locally owned partnerships and other entities in 46 countries. In 2001, Accenture's 2,500 partners chose to move to corporate form and seek a public listing; and voted to incorporate the parent company, Accenture Ltd, in Bermuda. If shareholders and the Supreme Court of Bermuda approve, Accenture PLC, an Irish company, will replace Accenture Ltd. as the parent company.
Second, the background:
President Obama’s administration recently announced significant changes in US tax policy, with a view to target companies which are basically operating in the US but are incorporated in tax havens outside America, and bringing their worldwide income under US tax jurisdiction.
Accenture is not alone, just in the past six months, the WSJ reports that Tyco International Ltd., Foster Wheeler Ltd., Weatherford International Ltd., Transocean Inc., Covidien Ltd., and Ingersoll-Rand Co. have all announced plans or finalized plans to change their places of incorporation.
Third, the motivation:
According to William D. Green, Accenture's chairman & CEO, "After a careful review, our Board of Directors has determined that changing our place of incorporation to Ireland is in the best interests of Accenture and our shareholders. We believe that incorporating in Ireland will provide Accenture with economic benefits and help ensure our continued global competitiveness.…”
Reading between the lines, we believe here are the key reasons for making this change at this point in time:
Continue Low Effective Tax Rate
Clearly there are financial benefits accruing to Accenture, while Bermuda imposes no corporate income tax, Ireland does have a such a tax around 12.5%, but doesn't impose it on various intra-company transactions, thus making it relatively easy to avoid. Accenture will have to do some strategic tax planning to ensure that the increased corporate tax rate in Ireland is effectively neutralized versus Bermuda. In 2008, Accenture paid $910 million taxes on a pretax income of $3.1 billion, almost 30% and less than the statutory US federal plus state tax rate of 39.5% on corporations.
Avoid Adverse Litigation
In addition, tax treaties signed in 1997 between US and Ireland can provide some form of protection for Accenture against any adverse litigation and potential double taxation.
Avoid Tough Proposed Legislation
Recent proposed legislation could be a problem for companies changing their place of incorporation from one tax friendly jurisdiction to another. Senators Levin and Doggett submitted bills that both require that companies controlled and managed in the US, regardless of where they are incorporated are subject to U.S. corporate-income tax. By moving at this time, Accenture can avoid the aftermath of this or any similar legislation.
Escape Public Criticism
“We have become concerned that the ongoing criticism of companies that are incorporated in Bermuda has raised questions that we need to address,” said Jim McAvoy, an Accenture spokesman.
US companies based in Bermuda are likely to face political and public criticism in the first wave following tax loophole eliminations as they are nearest to home country, US companies based in Europe may comparatively face less scrutiny at least on a relative scale.
Move Geographically With The Business
Almost 50% of Accenture’s business comes from Europe region which is the company’s largest region ahead of the 40% business coming from Americas. This is in line with other Big4 firms whose European revenues also exceed US based revenues and are growing at a faster rate.
Finally, there are some things that will not change:
No material change in operations, financial results or tax treatment
Continue to be registered with the U.S. Securities and Exchange Commission
Shares will continue to trade on the New York Stock Exchange.
Subject to same SEC reporting requirements as NYSE companies
How did investors react to this? The news was released at 4pm on Tuesday after markets closed and ACN stock fell by 1.5% on Wednesday in line with the general downturn in the market. In summary, investors don’t really seem to think that this has any shareholder value impact.
Accenture is a financially very savvy company, and this move illustrates the agility and acumen of their operating and financial management. The company is not shy to take tough quick decisions to make or save money. Its original intent to incorporate outside the US caused some furor but the company effectively managed that and continued to pursue its original intentions. The current move is equally smart, and we have little doubt that Accenture will get this voted by shareholders and consummate the change in Q3 of this year. If by any chance, the shareholder vote is not in favor, we’ll be back to talk about this in a few months.
First, some history:
Prior to 2001, Accenture operated as a group of more than 40 locally owned partnerships and other entities in 46 countries. In 2001, Accenture's 2,500 partners chose to move to corporate form and seek a public listing; and voted to incorporate the parent company, Accenture Ltd, in Bermuda. If shareholders and the Supreme Court of Bermuda approve, Accenture PLC, an Irish company, will replace Accenture Ltd. as the parent company.
Second, the background:
President Obama’s administration recently announced significant changes in US tax policy, with a view to target companies which are basically operating in the US but are incorporated in tax havens outside America, and bringing their worldwide income under US tax jurisdiction.
Accenture is not alone, just in the past six months, the WSJ reports that Tyco International Ltd., Foster Wheeler Ltd., Weatherford International Ltd., Transocean Inc., Covidien Ltd., and Ingersoll-Rand Co. have all announced plans or finalized plans to change their places of incorporation.
Third, the motivation:
According to William D. Green, Accenture's chairman & CEO, "After a careful review, our Board of Directors has determined that changing our place of incorporation to Ireland is in the best interests of Accenture and our shareholders. We believe that incorporating in Ireland will provide Accenture with economic benefits and help ensure our continued global competitiveness.…”
Reading between the lines, we believe here are the key reasons for making this change at this point in time:
Continue Low Effective Tax Rate
Clearly there are financial benefits accruing to Accenture, while Bermuda imposes no corporate income tax, Ireland does have a such a tax around 12.5%, but doesn't impose it on various intra-company transactions, thus making it relatively easy to avoid. Accenture will have to do some strategic tax planning to ensure that the increased corporate tax rate in Ireland is effectively neutralized versus Bermuda. In 2008, Accenture paid $910 million taxes on a pretax income of $3.1 billion, almost 30% and less than the statutory US federal plus state tax rate of 39.5% on corporations.
Avoid Adverse Litigation
In addition, tax treaties signed in 1997 between US and Ireland can provide some form of protection for Accenture against any adverse litigation and potential double taxation.
Avoid Tough Proposed Legislation
Recent proposed legislation could be a problem for companies changing their place of incorporation from one tax friendly jurisdiction to another. Senators Levin and Doggett submitted bills that both require that companies controlled and managed in the US, regardless of where they are incorporated are subject to U.S. corporate-income tax. By moving at this time, Accenture can avoid the aftermath of this or any similar legislation.
Escape Public Criticism
“We have become concerned that the ongoing criticism of companies that are incorporated in Bermuda has raised questions that we need to address,” said Jim McAvoy, an Accenture spokesman.
US companies based in Bermuda are likely to face political and public criticism in the first wave following tax loophole eliminations as they are nearest to home country, US companies based in Europe may comparatively face less scrutiny at least on a relative scale.
Move Geographically With The Business
Almost 50% of Accenture’s business comes from Europe region which is the company’s largest region ahead of the 40% business coming from Americas. This is in line with other Big4 firms whose European revenues also exceed US based revenues and are growing at a faster rate.
Finally, there are some things that will not change:
No material change in operations, financial results or tax treatment
Continue to be registered with the U.S. Securities and Exchange Commission
Shares will continue to trade on the New York Stock Exchange.
Subject to same SEC reporting requirements as NYSE companies
How did investors react to this? The news was released at 4pm on Tuesday after markets closed and ACN stock fell by 1.5% on Wednesday in line with the general downturn in the market. In summary, investors don’t really seem to think that this has any shareholder value impact.
Accenture is a financially very savvy company, and this move illustrates the agility and acumen of their operating and financial management. The company is not shy to take tough quick decisions to make or save money. Its original intent to incorporate outside the US caused some furor but the company effectively managed that and continued to pursue its original intentions. The current move is equally smart, and we have little doubt that Accenture will get this voted by shareholders and consummate the change in Q3 of this year. If by any chance, the shareholder vote is not in favor, we’ll be back to talk about this in a few months.
Monday, May 25, 2009
BDO Seidman Vs Banco Espirito Case - Trial Begins Tomorrow in Florida Court
BDO Seidman Vs Banco Espirito Case - Trial Begins Tomorrow in Florida Court
In August of 2007, we had blogged about a large $521 million financial judgment against BDO Seidman in its audit of Banco Espirito Santo of Portugal. At that time, we said,
“Banco Espirito Santo claimed it partnered with Bankest Capital to form E.S. Bankest in late 1990s relying on (BDO Seidman's) faulty audits that Bankest Capital's income had nearly tripled from 1995 to 1996. The bank also relied on later audits from BDO Seidman, which certified audits for E.S. Bankest accounts totaling some $225 million, of which only $5 million represented legitimate income.The bank is understandably happy with this verdict, but BDO Seidman will appeal it vigorously, by posting a $50 million bail. As expected, the firm will argue that senior management at Banco Espirito Santo was aware of this fraud and was also complicit.”
Also, we analyzed the relationship between BDO Seidman, the US firm and its global parent, BDO International, which is about 6 times its size:
“BDO Seidman USA is allied with BDO International, which coordinates companies with about 30,000 partners and staff and reported total fee income of $3.91 billion in 2006. In the US, BDO Seidman had revenues of $589 million in 2006, 3,800 employees,. 250 partners and 34 offices.”
See our entire blog post here:
http://bigfouralumni.blogspot.com/2007/08/bdo-seidman-ordered-to-pay-521-million.html
After much legal wrangling, the case has come to court again for a 10-day trial tomorrow at the 11th Judicial Circuit of Florida, Miami-Dade County, before Honorable John Schlesinger. The court is to establish whether BDO Seidman was an agent of BDO International. An earlier trial court had ruled that Banco Espirito's evidence presented could not have established agency, but the Florida Court of Appeal ruled that the plaintiff was entitled to a trial on whether BDO Seidman had acted as the international accounting network's agent.
What’s at stake? Might the international accountancy network be vicariously liable for judgment against its network member BDO Seidman, and in a larger sense potentially liable for the $521 million judgment against BDO Seidman, with consequent financial implications for both plaintiff and defendant?
The question of “agency” and “agent” is a critical issue for all Big Four firms, in that they are in some sense a conglomeration of country partnerships held contractually together under a global firm organization umbrella. Take the case of Satyam Computers, where the Indian government is arguing that PwC India was a unit of PricewaterhouseCoopers global firm and any judgment against the member firm stands against the global firm, which PwC firmly disputes.
More so, if claims against the child firm were transposed to the parent firm, then plaintiffs and juries may well be inclined to levy huge financial penalties which while being considered huge by a child firm, could be small in the scope of the global parent. This could lead to a partial or total rewrite of contractual relationships between parent and child.
If you’re interested in the outcome of this trial, Courtroom View Network’s on-demand offering of the Banco Espirito v BDO International trial is available for purchase on its website, www.courtroomview.com.
We’ll be following as well and report on the proceedings and its ultimate result shortly,
In August of 2007, we had blogged about a large $521 million financial judgment against BDO Seidman in its audit of Banco Espirito Santo of Portugal. At that time, we said,
“Banco Espirito Santo claimed it partnered with Bankest Capital to form E.S. Bankest in late 1990s relying on (BDO Seidman's) faulty audits that Bankest Capital's income had nearly tripled from 1995 to 1996. The bank also relied on later audits from BDO Seidman, which certified audits for E.S. Bankest accounts totaling some $225 million, of which only $5 million represented legitimate income.The bank is understandably happy with this verdict, but BDO Seidman will appeal it vigorously, by posting a $50 million bail. As expected, the firm will argue that senior management at Banco Espirito Santo was aware of this fraud and was also complicit.”
Also, we analyzed the relationship between BDO Seidman, the US firm and its global parent, BDO International, which is about 6 times its size:
“BDO Seidman USA is allied with BDO International, which coordinates companies with about 30,000 partners and staff and reported total fee income of $3.91 billion in 2006. In the US, BDO Seidman had revenues of $589 million in 2006, 3,800 employees,. 250 partners and 34 offices.”
See our entire blog post here:
http://bigfouralumni.blogspot.com/2007/08/bdo-seidman-ordered-to-pay-521-million.html
After much legal wrangling, the case has come to court again for a 10-day trial tomorrow at the 11th Judicial Circuit of Florida, Miami-Dade County, before Honorable John Schlesinger. The court is to establish whether BDO Seidman was an agent of BDO International. An earlier trial court had ruled that Banco Espirito's evidence presented could not have established agency, but the Florida Court of Appeal ruled that the plaintiff was entitled to a trial on whether BDO Seidman had acted as the international accounting network's agent.
What’s at stake? Might the international accountancy network be vicariously liable for judgment against its network member BDO Seidman, and in a larger sense potentially liable for the $521 million judgment against BDO Seidman, with consequent financial implications for both plaintiff and defendant?
The question of “agency” and “agent” is a critical issue for all Big Four firms, in that they are in some sense a conglomeration of country partnerships held contractually together under a global firm organization umbrella. Take the case of Satyam Computers, where the Indian government is arguing that PwC India was a unit of PricewaterhouseCoopers global firm and any judgment against the member firm stands against the global firm, which PwC firmly disputes.
More so, if claims against the child firm were transposed to the parent firm, then plaintiffs and juries may well be inclined to levy huge financial penalties which while being considered huge by a child firm, could be small in the scope of the global parent. This could lead to a partial or total rewrite of contractual relationships between parent and child.
If you’re interested in the outcome of this trial, Courtroom View Network’s on-demand offering of the Banco Espirito v BDO International trial is available for purchase on its website, www.courtroomview.com.
We’ll be following as well and report on the proceedings and its ultimate result shortly,
Tuesday, May 19, 2009
Deloitte Social Media Survey Results May Surprise You
Deloitte has just released its 2009 Ethics & Workplace Survey with some fascinating findings and implications for professionals, employers, social networks and internet behavior. It shows the stark differences between the views of employers and employees and the blurring lines between professional and personal lives, the tensions between the benefits from participating in social media, balanced against reputational risks of any missteps.
First the stand-offs between employers and employees: 60% of business executives believe they have a right to know how employees portray themselves and their organizations in online social networks. But 53% of employees disagree, saying that their social networking pages are not an employer’s concern, more vehemently so by 18-34 year old workers, who think employers have no business monitoring their online activity. However, all employees understand risk, 74% realize they can damage a company’s reputation.
According to Sharon Allen, chairman of the board, Deloitte LLP, “…a single act can create far reaching ethical consequences for individuals as well as employers.”
Thankfully for employees, only 17% of executives have programs to monitor and mitigate risks from use of social networks. While 25% of businesses have formal policies, that does not deter 49% of employees.
It seems clear that mandates don't work fully, it is better to rely on prudence and values. Again, Allen, “…it is critical that we continue to foster solid values-based cultures that encourage employees to behave ethically regardless of the venue.”
Here’s some more interesting and surprising findings:
How often do you visit social networking sites? 45% say 1 to 5 times a week
If you use social networking sites, do you access them during work hours? 52% don’t during working hours, 26% cannot access thru company networks
“The content on your Facebook, MySpace or Twitter pages prevented you from getting a job.” 89% say False, this seems to be a prevalent urban myth
Our CEO is on Facebook: 31% say Yes
We utilize social networking for recruiting purposes: 23% say Yes
“My company has formal policies that dictate how employees can use social networking tools.” 72% say False
By curtailing social media, is business impinging on an employee’s privacy and freedom of speech? By inappropriately posting on the internet is the employer bearing otherwise avoidable risk? These are tough questions to deal with….
All in all, this survey shows the wide gap between businesses and their workers, and the complexities involved in appropriately managing an online presence versus curbing employee activities set against risks of potential rogue behavior. Social media has taken professionals by storm, especially recently, and organizations appear to be grappling with all aspects of this avalanche. As with all such phenomena, either a cataclysmic event will lead to regulations across the board, or evolution combined with reasonable give and take will yield acceptable norms.
First the stand-offs between employers and employees: 60% of business executives believe they have a right to know how employees portray themselves and their organizations in online social networks. But 53% of employees disagree, saying that their social networking pages are not an employer’s concern, more vehemently so by 18-34 year old workers, who think employers have no business monitoring their online activity. However, all employees understand risk, 74% realize they can damage a company’s reputation.
According to Sharon Allen, chairman of the board, Deloitte LLP, “…a single act can create far reaching ethical consequences for individuals as well as employers.”
Thankfully for employees, only 17% of executives have programs to monitor and mitigate risks from use of social networks. While 25% of businesses have formal policies, that does not deter 49% of employees.
It seems clear that mandates don't work fully, it is better to rely on prudence and values. Again, Allen, “…it is critical that we continue to foster solid values-based cultures that encourage employees to behave ethically regardless of the venue.”
Here’s some more interesting and surprising findings:
How often do you visit social networking sites? 45% say 1 to 5 times a week
If you use social networking sites, do you access them during work hours? 52% don’t during working hours, 26% cannot access thru company networks
“The content on your Facebook, MySpace or Twitter pages prevented you from getting a job.” 89% say False, this seems to be a prevalent urban myth
Our CEO is on Facebook: 31% say Yes
We utilize social networking for recruiting purposes: 23% say Yes
“My company has formal policies that dictate how employees can use social networking tools.” 72% say False
By curtailing social media, is business impinging on an employee’s privacy and freedom of speech? By inappropriately posting on the internet is the employer bearing otherwise avoidable risk? These are tough questions to deal with….
All in all, this survey shows the wide gap between businesses and their workers, and the complexities involved in appropriately managing an online presence versus curbing employee activities set against risks of potential rogue behavior. Social media has taken professionals by storm, especially recently, and organizations appear to be grappling with all aspects of this avalanche. As with all such phenomena, either a cataclysmic event will lead to regulations across the board, or evolution combined with reasonable give and take will yield acceptable norms.
Thursday, May 14, 2009
Big4 Firm Surveys Uniformly Indicate Weak Sentiment, Some Recent Hope
We looked at some survey results from independently conducted surveys by the Big 4 firms in recent months as a gauge for the depth and breadth of the global economic crisis and any nascent signs of its ending.
The most encouraging outlook comes from a May 2009 survey of KPMG Business outlook for EU services, which shows that the economic crisis in the region may abate over the next 12 months, though most survey variables remained at historically weak levels. KPMG found that net balances for business volumes, revenues and incoming new business all improved in April compared to those posted six months earlier. Nearly 40% of EU service providers expect volume growth, while only half 21% were expecting declines. Also, inflation fears appear to be receding as commodities decline and payrolls stay flat.
Also in May 2009, Deloitte reported some not so good news on consumer spending. The Deloitte Consumer Spending Index dropped in April as falling housing prices and rising unemployment claims offset gains from real wage growth, reduced tax burden and lower energy prices. The Index, comprising four components ― tax burden, initial unemployment claims, real wages and real home prices ― fell to 1.46% from an upwardly revised gain of 1.95% a month ago. Significantly, initial unemployment claims continue at record pace since the Fall of 2008, and real wage growth posting only small gains due to falling energy prices for energy. The final impact on an already stretched consumer are decreasing home prices, though tax credits help, mortgage financing remains scarce.
On the IPO front, an indicator of confidence in new business and capital markets, sentiment remains dull. In April, Ernst & Young found that global IPO activity continues to stall, There were a miniscule 50 IPOs worldwide in Q1-2009 raising just US$1.4 billion in capital, with only two deals raising over US$100 million. This compares with 78 IPOs worth US$2.6 billion in Q4-2008 and a rousing US$41.2 billion in Q1 2008. There seems to be some hope in the pipeline, with some companies continue to ready themselves to go public while waiting for market conditions to stabilize.
In January 2009, in sync with the World Economic Forum at Davos, PricewaterhouseCoopers revealed its 12th Annual 2008 Global CEO Survey, which painted a gloomy picture in the corner office. CEO confidence plunged to its lowest level since 2003, with only 21% of global CEOs saying they were very confident of revenue growth in the next 12 months, down from 50 per cent in last year's survey. And more than a quarter of CEOs said they were pessimistic about prospects for the coming year. CEOs worldwide were also gloomier about longer term growth as well, predicting a slow recovery. Only 34% seemed very confident of growth over the next three years, down from 42% last year
In April 2009, Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, found that 77% of US CFOs and senior comptrollers said the U.S. economy will remain the same or get worse in the next six months, and 39% expecting their company's headcount to decrease. Only 31% expected their company's financial prospects to improve. More significantly, 87% thought that the U.S. economy will remain in a recession through the end of 2009.
These surveys conducted by reputable organizations surveying different group of business leaders and using different methodologies yet arriving at similar results indicates that uniformly economic sentiment remains very weak among company executives, worries about future growth, continued recession and dull employment prospects seem to predominate. The most recent KPMG survey seems to offer some green shoot of promise and we may begin to look at these surveys from all the Big Four firms as another leading indicator of sentiment and action as the world hopefully pulls itself of this economic mess in the short term to everyone’s great relief.
The most encouraging outlook comes from a May 2009 survey of KPMG Business outlook for EU services, which shows that the economic crisis in the region may abate over the next 12 months, though most survey variables remained at historically weak levels. KPMG found that net balances for business volumes, revenues and incoming new business all improved in April compared to those posted six months earlier. Nearly 40% of EU service providers expect volume growth, while only half 21% were expecting declines. Also, inflation fears appear to be receding as commodities decline and payrolls stay flat.
Also in May 2009, Deloitte reported some not so good news on consumer spending. The Deloitte Consumer Spending Index dropped in April as falling housing prices and rising unemployment claims offset gains from real wage growth, reduced tax burden and lower energy prices. The Index, comprising four components ― tax burden, initial unemployment claims, real wages and real home prices ― fell to 1.46% from an upwardly revised gain of 1.95% a month ago. Significantly, initial unemployment claims continue at record pace since the Fall of 2008, and real wage growth posting only small gains due to falling energy prices for energy. The final impact on an already stretched consumer are decreasing home prices, though tax credits help, mortgage financing remains scarce.
On the IPO front, an indicator of confidence in new business and capital markets, sentiment remains dull. In April, Ernst & Young found that global IPO activity continues to stall, There were a miniscule 50 IPOs worldwide in Q1-2009 raising just US$1.4 billion in capital, with only two deals raising over US$100 million. This compares with 78 IPOs worth US$2.6 billion in Q4-2008 and a rousing US$41.2 billion in Q1 2008. There seems to be some hope in the pipeline, with some companies continue to ready themselves to go public while waiting for market conditions to stabilize.
In January 2009, in sync with the World Economic Forum at Davos, PricewaterhouseCoopers revealed its 12th Annual 2008 Global CEO Survey, which painted a gloomy picture in the corner office. CEO confidence plunged to its lowest level since 2003, with only 21% of global CEOs saying they were very confident of revenue growth in the next 12 months, down from 50 per cent in last year's survey. And more than a quarter of CEOs said they were pessimistic about prospects for the coming year. CEOs worldwide were also gloomier about longer term growth as well, predicting a slow recovery. Only 34% seemed very confident of growth over the next three years, down from 42% last year
In April 2009, Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, found that 77% of US CFOs and senior comptrollers said the U.S. economy will remain the same or get worse in the next six months, and 39% expecting their company's headcount to decrease. Only 31% expected their company's financial prospects to improve. More significantly, 87% thought that the U.S. economy will remain in a recession through the end of 2009.
These surveys conducted by reputable organizations surveying different group of business leaders and using different methodologies yet arriving at similar results indicates that uniformly economic sentiment remains very weak among company executives, worries about future growth, continued recession and dull employment prospects seem to predominate. The most recent KPMG survey seems to offer some green shoot of promise and we may begin to look at these surveys from all the Big Four firms as another leading indicator of sentiment and action as the world hopefully pulls itself of this economic mess in the short term to everyone’s great relief.
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