June, 2008 BCIS 4690 1

Genealogy of Consulting Firms

Phil Osborn, PrincipleIT Management Consultants

w/editorial assistance fromBCIS 4690 Class; Summer, 2008

50 Bonus Pts• Due: 7/8/2010: May be sent by Email to me.• Requirements:• 1. Update the Consulting History through July

2010.• A. Update These Slides; Add as many new

slides as needed to complete this presentation.• B. Include a 1000 word narrative summarizing

the significant changes• C. Include an annotated Bibliography to

substantiate the events noted.

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Preview• Timeline• Major Players in Accounting Industry

– Beginning of Consulting– Big 8 Formed Companies– Main Movements– Intermediate Mergers– Big 4 Players

• Ernst and Young• Deloitte Touche Tohmastsu• KPMG• Price Waterhouse Coopers

– IT Consulting Players• IBM (Price Waterhouse Coopers)• Cap Gemini (Ernst & Young)• Accenture (Arthur Anderson)• Bearing Point (KPMG)

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Timeline

Left out the sale/exit of Big 8consulting businesses

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“The Birth of Management Consulting”

• A.T. Kearney – Orginially Kearney & MicKinsey in 1922– A. Thomas Kearney kept the name after

McKinsey left to be CEO of Marshall Fields– McKinsey starts with there beginning after

A.T. Kearney, makes it appear as if they were first.

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The Big 8 [circa 1970]1. Arthur Anderson

– 1913- Founded as by as Andersen, DeLany & Co– 1918- Name changed to Arthur Andersen & Co– 2001- Andersen consulting forced to change name to

Accenture– 2002-Convicted for shredding documents related to its

audit of Enron.– 2005- Conviction overturned by Supreme Court due to

flaws in the jury instructions2. Coopers & Lybrand

– 1957 merger of Cooper Brothers & Co; Lybrand, Ross Bros & Montgomery and a Canadian firm McDonald, Currie and Co

– 1998 merged in with Price Waterhouse to form PricewaterhouseCoopers.

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The Big 83. Deloitte Haskins & Sells (Haskins & Sells)

– 1845- Deloitte founded by William Deloitte– 1952-Agreement reached to merge the businesses of

Deloitte, Plender, Griffiths & Company and Haskins & Sells in the U.S., under the name Deloitte Haskins & Sells.

– 1992- Coopers & Lybrand Deloitte became Coopers & Lybrand

– Deloitte Haskins & Sells was a predecessor firm of Coopers and Lybrand UK and Deloitte Touche Tohmatsu

4. Ernst & Whinney (Ernst & Ernst)– 1903- A.C. Ernst in 1903, joined with his brother,

Theodore, to start Ernst & Ernst. Accounting firm– Whinney, Smith & Whinney had been closely allied with

Ernst & Ernst since the 1940s, and in 1979 Whinney Murray, Ernst & Ernst, and Turquands Barton Mayhew joined together as Ernst & Whinney, creating the fourth largest accountancy firm in the world.

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The Big 8

5. Peat, Marwick, Mitchell– 1867- Robert Fletcher establishes accountancy firm

which later becomes Peat Marwick Mitchell – 1925-  Peat and Marwick Mitchell & Co join to create a

transatlantic firm

6. Touche Ross– 1960-Touche, Niven, Bailey & Smart merges with George

Touche & Co. (Britain) and Ross, Touche & Co. (Canada) to form Touche, Ross, Bailey & Smart

– 1969- Adoption of the name Touche Ross & Co., mergers completed with more than 50 other firms in the U.S. and formal associations created with national firms in 55 countries.

– 1975- Agreement reached with Tohmatsu Awoki & Co into Touche Ross

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The Big 8

7. Price Waterhouse– 1849 - Samuel Lowe Price creates firm in U.K.– 1865 - Samuel Price partners with William Holyland and

Edwin Waterhouse.– 1997 - Price Waterhouse and Coopers & Lybrand

announce plans for a global merger and integration.– 1998 - Price Waterhouse and Coopers & Lybrand

complete a global merger and the name of the new firm is PricewaterhouseCoopers

8. Arthur Young– 1906 Arthur Young & Company was set up in Chicago – 1989 Ernst & Whinney the fourth largest accountancy firm

in the world merged with the then number five, Arthur Young, to create Ernst & Young

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Primary Movements

• Equity Funding Scandal (1973) precipitated computer audit practices

• Saving and Loan Crisis (Started in 1980 fell 1988)• Y2K January 1, 2000• The Enron Scandal of 2002 brought to light problems

in accounting auditing and was the precursor of the fall of Arthur Anderson the companies primary auditing firm (Filed Bankruptcy in November 2002)

• Sarbanes Oxley Effective July 30, 2002

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The 3 Intermediate Mergers

Three Mergers• KPMG Peat Marwick• Ernst & Young• Deloitte & Touche

The three holdouts (only room for two)

• Anderson Worldwide• Coopers & Lybrand• Price Waterhouse

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Big 4

• Ernst and Young

• Deloitte Touche Tohmastsu

• KPMG

• Price Waterhouse Coopers

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Ernst & Young

• 1989- Two biggest accounting firms merge – Arthur & Young & Co and Ernst & Whinney

• 1996- Consulting sector splits from management Service Activities

• 2001- Major take over of tax consultants

• 2003- Audit firm “Swaelen & Co” joins Ernst & Young

Note: Slogan from E&W

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Deloitte Touche Tohmastsu

• 1952-Agreement reached to merge the businesses of Deloitte, Plender, Griffiths & Company and Haskins & Sells in the U.S., under the name Deloitte Haskins & Sells.

• 1952- Nobuzo Tohmatsu qualifies as a certified public accountant in Japan and becomes a partner in a foreignaffiliated accounting firm.

• 1972- Touche Ross Chairman Robert Trueblood chairs a committee that leads to the establishment of the Financial Accounting Standards Board — the FASB.

• 1990- Merger that creates Deloitte & Touche.• 1993- International firm is named Deloitte Touche

Tohmatsu.

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KPMG

• 1876- Robert and Sydney Stpkes establish Stokes Firm

• 1987- Firm becomes part of firm accountancy mega-merger

• 2000- Consulting wing becomes an independent firm

• 2002- Merger lead to enlargement of firm

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PriceWaterhouseCoopers

• 1849- Founded in London

• 1890- New York office opened

• 1998- Formed from merger between Price Waterhouse and Coopers & Lybrand

• 1990- coopers & Lybrand merged with Deloitte Haskins & Sells in the United Kingdom

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IT Consulting Players

• IBM (Price Waterhouse Coopers)– No merger between Arthur Anderson and Price

Waterhouse due to cultural differences

• Cap Gemini (Ernst & Young)– Grew out of services offering

• Accenture (Arthur Anderson)– Faced legal challenges after Enron

• Bearing Point (KPMG)– No deal when it tried to joint venture with CISCO

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Conclusion

• Consulting opened new industry

• Industry movements lead to mergers

• IT needs own consulting area– Driven by regulatory acts– Big IT Consulting is captive to IT product

vendors and outsourcers, no longer independent