By its own logic, Deloitte is ‘disrupted’, ‘disadvantaged’, or ‘distressed’
In a shock announcement, Deloitte said it will undergo a major restructure which will come into effect by mid-year.
In a move announced via email to Deloitte partners on Monday, global CEO Joe Ucuzoglu explained the plan to cut its business units down from five to four, as broken by The Australian Financial Review.
The restructure, designed to cut costs and operational complexity, is being called the largest shake-up since 2014. Accounting Times has learned the restructure will be implemented in Australia by 1 June.
A Deloitte spokesperson told Accounting Times the company “recently completed a thoughtful process to modernise and simplify how Deloitte organises its go-to-market strategy and offering storefront.”
In 2020, the firm released a pandemic-geared report titled Seeing Restructuring Through a Wider Lens, which challenged the notion that restructures were reserved for the imperiled.
“Restructuring is commonly employed to turn around troubled enterprises, but this narrow lens misses a broader opportunity to improve business performance,” said the report.
Despite the cladding, the report said restructuring activities can generally be broken down into three segments "along a continuum," namely: there are those designed to help the “disrupted”, those for the “disadvantaged,” and the “distressed.”
Which, then, is Deloitte? According to Adam Powick, Deloitte's Australian CEO, the restructure has been a year in the making, adding however, that the local consulting market has "remained challenging."
The new structure will "better align with priority client needs, simplify our offering model to make it easier to team and provide multidisciplinary solutions for our clients. It will also address duplication in services which have arisen over time."
Despite market challenges, Deloitte Australia posted a 14 per cent increase in revenue last year and, globally, a 9.3 per cent USD increase in FY 2023.
Whatever the cause, it’s a marked change in tone from Ucuzoglu’s assurance messaging last year that an audit and consulting breakup was not on the cards.
“We’re not going to go looking for a solution in search of a problem here,” he said in a 20-minute video posted on Deloitte’s website last year.
The changes are expected to have minimal impact on the day-to-day operations of the company, though they are expected to help cross-firm collaboration.
While the work done within each business unit will be unaffected, many divisions will be rolled up into a combined unit.
Deloitte's risk and financial advisory and consulting divisions will be brought into two new business units. The first is strategy, risk, and transactions and, the second is technology and transformation.
The former will combine the firm’s risk division with its mergers and acquisitions advisory services.
This decision might have something to do with an anaemic M&A sector both domestically and abroad. In 2023, Deloitte recorded only seven M&A transactions, according to The Australian.
Justin Smith, chief revenue and marketing officer at Ansara, said “Soft GDP projections, the anticipation of higher-for-longer interest rates, and a challenging financing environment caused big-ticket, transformational M&A to vanish almost entirely [in 2023].”
M&A transactions were low across the previous calendar year, with some pickup at the small end of town in the latter half of 2023. Bigger transactions, those most prized by larger consulting firms like Deloitte, were harder to come by.
The latter tech and transformation unit will reportedly combine its digital transformation services – from engineering and AI to cyber and data.
Tax and legal will be unaffected by the restructure, remaining an independent business. The decision to keep tax intact marks a different approach from that employed by PwC US’s split of its tax function into advisory and assurance.
EY's restructuring efforts, dubbed 'Project Everest' were aborted last year over disagreements regarding how best to divide its tax practice. The project was estimated to have cost EY more than US$100 million.
