Deloitte first Big Four in the Netherlands to breach €1 billion

23 September 2019 Consultancy.eu

Deloitte is set to become the first of the Big Four firms in the Netherlands to break through the magical barrier of €1 billion in revenues. The milestone, which is anticipated to be reached in the current fiscal year, would be the cherry on the cake of a remarkable catch-up – ten years ago Deloitte was still smaller than all three of its arch-rivals EY, KPMG and PwC.

The outbreak of the financial crisis has drastically reshuffled the cards in the Dutch Big Four landscape. Up to the financial year 2007/08, Deloitte was the country’s largest accounting and consulting firm. Deloitte gained the market leading position when after the Enron scandal it acquired the Dutch wing of Arthur Andersen, in a move that added €168 million to its turnover.

When the financial crisis kicked in, the downturn in demand for accounting and consulting services hit Deloitte the hardest. The firm not only fell from its throne, displaced by PwC, but by 2010, competitors EY and KPMG had also outgrown Deloitte. 

A path to growth

Under the leadership of Peter Bommel, the firm’s chief executive officer (CEO) between 2011 and 2018, Deloitte embarked on a remarkable resurgence. At the heart of its success was a strategy that it knew all too well from the past: expand the consulting business.

Revenue of Deloitte in the Netherlands

Of the Big Four, Deloitte has always had an edge in consulting services. When Enron collapsed in 2002 in the United States, major questions of independence between audit and advisory services combined with financial pressures prompted the Big Four to divest their consulting arms. IBM bought PwC Consulting globally, Capgemini acquired EY Consulting globally and KPMG Consulting rebranded independently as BearingPoint (in the Netherlands, KPMG Consulting was purchased by Atos). Then, when the consulting market returned to its golden years, the trio had to start from scratch. 

Although it came inches close to spinning-off its consulting wing into an independent business (set to be named ‘Braxton’), Deloitte ultimately kept its consulting division, and since, the firm has reaped the fruits from its decision. In the years up to the crisis, Deloitte had the largest consulting practice of the Big Four, both globally as well as in the Netherlands. 

The comeback of consulting

In the Benelux country, renewed faith in the by then proven strategy lifted the firm however to even larger heights. One of the key decision of the Dutch partner team was to invest heavily in advisory services. Deloitte built on its Deloitte Consulting heritage and expanded the practice from a €95 million business in 2011 to the current €266 million. Today, Deloitte Consulting employs more than 1,300 consultants in the Netherlands, led by some 65 partners. 

Obviously, Deloitte was able to ride the wave of the growing consulting space. A flourishing Dutch economy has seen the country’s consultancy market thrive, driven by strong demand for digital transformation, more agile ways of working, a changing consumer landscape, awareness of environmental and societal impact, and loads of capital investments into growth ambitions.

To accelerate revenue growth, Deloitte also closed a number of deals. In 2012 the professional services giant acquired Monitor at a global level (now Monitor Deloitte), adding a Dutch presence, and in the Netherlands among others supply chain specialist AEPEX and HR boutiques Indicia Talent & Performance and FCTB were bolted-on.

Growth of the Big Four in the Netherlands, 2010-2018

Yet arguably the key success factor for its growth was firm’s early spotting of the changing consultancy mix. A decade ago, consulting was all about management consulting services, such as strategy, organisation, operations and finance. In the intervening years, consulting has undergone a metamorphosis, and branched out to all kinds of new fields of expertise. The influence of technology, consumerism and heightened competition has meant that consultants now also help clients design products/services, embrace agile and lean, and most importantly, apply technology.

Technology-driven services such as the digitisation of operations, analytics, cloud, robotics, artificial intelligence and data-driven working are now among the fastest growing segments within the consulting industry. In this technology space, Deloitte was the quick off the mark. All of the firm’s main service areas – Strategy, Operations, Finance, Human Capital and of course Technology – were front runners in embedding technology as a key part of their offerings.

In addition, the firm introduced Deloitte Digital, an arm dedicated to digital transformation execution. In 2012, Deloitte was the first of the Big Four globally to launch a separate digital brand, and today Deloitte Digital has over 9,000 consultants in 30 countries. Also in the Netherlands, Deloitte pioneered the digital wave, and today Deloitte Digital has an established 200-strong team operating from an own studio in Amsterdam. In May this year, Deloitte Digital boosted its Dutch digital marketing services with the purchase of Pervorm

Deloitte’s consulting partner team further recognised the growing need for an end-to-end service. The firm invested in both broadening and extending its portfolio, enabling it to cover the full spectrum of services. “Our clients increasingly demand a consulting partner that supports them in transforming their business from business strategy to execution. We provide this support through multi-disciplinary services and strategic, operational, human capital and technology capabilities,” elaborated Erik Nanninga, Managing Partner of Deloitte Consulting in the Netherlands. 

Revenue of Deloitte member firms in EuropeInternally, the firm took several steps to prepare itself for the changing face of consulting. The Dutch arm of Deloitte joined Deloitte North West Europe (a regional bundling of Deloitte member firms with revenues of over €5 billion) to improve collaboration for international clients and on projects. The firm built an off-shore delivery model in South/East Europe and Asia to execute operational work more quickly and cost-effectively, and launched a gig-economy platform that helps the firm leverage independent consultants to address peak demand and specific competences. 

Financial Advisory

A strong push to increase its market share in the financial segment of advisory services was Deloitte’s second golden move. Deloitte provides such services – including corporate finance, mergers & acquisitions, risk management, forensics and actuarial services – through two units: Financial Advisory and Risk Advisory.

At the turn of the century, these two wings generated a turnover of €34 million in the Netherlands. Fast forward nearly two decades and that number stands at a staggering €258 million. Deloitte was miles behind its three Big Four rivals, yet now it can call itself the segment’s leader in size.

Deloitte invested heavily in financial advisory offerings that build on technology, such as deal analytics, cybersecurity, financial crime technology and forensic data mining. Moreover, it has leveraged its technology expertise to open up new revenue streams, such as managed services. The firm now not only consults on complex advisory matters, but also monitors these for clients and takes responsibility for continuous improvement. 

The Financial Advisory practice, currently led by Oscar Snijders and Twan Kilkens, has significantly bolstered its footprint in the deals space. Data from M&A databases such as Mergermarket and Refinitiv reveal that Deloitte is now one of the country’s most active large-cap deal-makers in corporate finance and transaction support. Nearly all of this growth was achieved organically, with the acquisition of local player Boer & Croon Corprote Finance extending the firm’s footprint to the mid-market segment. 

Revenue of the Big Four in the Netherlands

The magical barrier

While the Audit practice has seen nearly €200 million in revenue wiped off its accounts since 2003 (robots are marginalising the added value of accountants and fees have plummeted), the growth in advisory services has enabled Deloitte to reach record revenues of €968 million in its latest 2018/19 financial year. The magical €1 billion barrier is at its fingertips, and it is a near certainty that Deloitte will achieve this milestone somewhere in the coming year. Growth of just 3.5% is needed for this – in comparison, the firm’s average growth in the past four years was 10% per annum. 

The likelihood that rivals EY, KPMG or PwC grab the prestigious landmark from under Deloitte’s nose is practically naught. PwC had a revenue of €833 million in 2017/18 and is expected to reach around €900 million in its latest financial year (results will be announced next month). EY also has yet to release its 2018/19 results, but will likely reach a comparable turnover level to that of PwC. Meanwhile, number four KPMG is forecast to hover around the €700 million mark when it releases its results in December. Only a major acquisition – one that has hardly been seen before in the Netherlands – would help them steal the show.

According to chief executive officer Hans Honig, the first consultant to lead Deloitte in the country since it was founded in 1955, the firm is on course to achieve the special milestone: “While reflecting on the current environment and outlook, our goal is to continue building and executing on our growth strategy. In the year ahead, we will focus on further investing in quality, innovation and talent.” 

So, in a few months’ time, Deloitte’s Dutch organisation will join the elite club of several other European member firms that generate more than €1 billion in revenue, such as those in the United Kingdom (more than €4.1 billion), Germany (€1.5 billion) and France (€1.3 billion).