Fierce Talent War Among The Big Four Accounting Firms Results In Poaching As Growth Number Surge In FY23

The fierce talent war among the Big Four accounting firms is reaching new heights as they scramble to bolster their advisory practices and address gaps in their service portfolios amidst remarkable growth.

Deloitte, in a bold move, recently managed to attract 150 members, including 15 partners, from KPMG into its tax division. Not to be outdone, KPMG responded by actively courting 17-18 Deloitte partners and their teams from the rival’s risk and corporate investigation division.

Meanwhile, PwC is reportedly in the process of poaching eight partners from KPMG, along with more than 150 executives for its risk team, signaling the intensifying competition for top talent in the industry.

The accounting giants, EY, PwC, Deloitte, and KPMG, have collectively reported growth rates exceeding 25% for the fiscal year 2022-23, with their combined revenue approaching a staggering $4 billion.

This rapid expansion isn’t limited to advisory sectors like consulting and transactions; even traditional domains such as audit and tax have witnessed impressive growth rates of over 20% at each of these firms.

The soaring demand for their services has not only led to a constant influx of new teams but also individual partners, with an average of 14-20 partners changing firms within the Big Four each month.

Leaders in the industry attribute this surge in demand to ambitious growth plans by their clients, spurred by the resilience and expansion of the Indian economy.

As Vivek Prasad, markets leader at PwC India, states, companies are gearing up for the next phase of growth and seeking assistance in areas like technology, ESG (environmental, social, and governance), innovation, and trust-building in the ecosystem, the heightened demand across service lines has fueled the talent frenzy.

While EY primarily focuses on hiring smaller teams from competitors and recruiting industry experts, PwC, Deloitte, and KPMG have been aggressively pursuing larger teams from their rivals.

Deloitte India, under its new leader Romal Shetty, has embarked on an ambitious growth trajectory, targeting talent acquisition in areas such as tax, risk, and new technology.

PwC India, led by Sanjeev Krishan, is rapidly expanding its consulting, risk, and digital operations. Even KPMG, the smallest of the Big Four in India, is looking to hire substantial teams in advisory businesses, driven by robust performance.

Despite these developments, both KPMG and Deloitte spokespersons remain cautious, labeling the news as speculative and denying any ongoing discussions. At the partner level, firms typically require a six-month gardening leave to avoid conflicts of interest.

In the ever-competitive technology consulting sector, top firms have been actively poaching talent from Accenture to bolster their tech and AI teams.

These moves come with attractive bonuses, loan schemes, and stringent exit clauses, such as KPMG’s proposed 50% salary cut during the six-month gardening leave for partners joining a rival.

Many of the transitioning teams are currently on gardening leave or in protracted negotiations with both their current and prospective employers, underscoring the fluidity of this talent war.

How Deloitte May Have Started It
In June this year, Deloitte made a strategic move to poach talent from KPMG, a development that has sparked considerable attention in the world of professional services.

The audacious maneuver involved Deloitte enticing 15 partners and an estimated 130-150 professionals specializing in deal advisory from KPMG; this team movement ranks among the largest witnessed within the Big Four firms in recent times.

Despite Deloitte’s bold recruitment drive, KPMG made substantial efforts to retain the departing talent; the move comes on the heels of KPMG’s merger with erstwhile BMR Advisor’s transaction and risk advisory practice in 2017, a transaction that included 12 partners and 100 professionals.

What’s At Stake
This talent transition is occurring at a crucial juncture when the Big Four firms are actively engaged in significant and complex M&A investment banking deals.

Sources suggest that individual executive interviews have been taking place for several months; while the exact number of professionals making the move remains uncertain, given the number of partners involved, it is estimated that 130-150 executives are likely to follow suit.

Deloitte’s senior executive previously indicated in December 2022 that the firm has been expanding its focus on M&A beyond traditional transaction advisory roles, and Deloitte aims to leverage its firm-wide strengths to provide end-to-end M&A services, encompassing corporate finance, diligence, and valuations.

The demand for M&A advisory services has been on the rise, especially in the rapidly expanding mid-market segment. As a response, top professional services firms have initially focused on mid and small-sized deals, offering competitive fees and higher transaction volumes.

Attracting Talent Tier II Cities
In recent years, they have also shifted their attention towards larger deals, reflecting India’s evolving dealmaking arena, the flurry of activity in the professional services sector also comes amid a broader transformation in India’s job market.

Tier-2 cities are emerging as major talent hubs, drawing recruiters’ attention due to the rise of remote work, improved skilling opportunities, and the expansion of various industries in these areas.

A significant 54% of employers now expect to hire candidates from Tier-2 and Tier-3 cities, highlighting the increasing availability of diverse talent in these regions.

Moreover, global accounting firms are capitalizing on the growing demand for cost-effective back-office operations by establishing new facilities in smaller Indian cities; traditionally, these firms relied on larger urban centers like Mumbai, Delhi, and Bengaluru for their operational centers.

However, challenges such as rising costs, high attrition rates, and the impact of the pandemic have prompted a shift towards tier-2 cities like Jaipur, Vadodara, Kochi, and Chandigarh; the establishment of “global capability centers” in these cities is expected to create professional opportunities, boost local economies, and potentially lead to higher salaries in these regions.

Ernst & Young’s report predicts that the number of these “global capability centers” could increase from 1,600 to 2,400 by 2030, creating 2.6 million jobs and contributing over $100 billion to India’s economy.

Notably, Deloitte, KPMG, and PwC are among the accounting firms at the forefront of expanding their presence in smaller Indian cities. Deloitte, with its substantial workforce of over 100,000 employees in India, plans to hire an additional 50,000 staff members in the coming three years, with a particular focus on new towns.

PwC, on the other hand, hired approximately 12,500 employees in the previous fiscal year and anticipates a similar hiring pattern this year. These expansions aim to address concerns about slowing hiring in sectors like manufacturing and IT while providing relief to the labor market.

What’s attracting these global accounting firms to smaller Indian towns?

Primarily, it’s the growing demand for cost-effective back-office operations, combined with the upward economic trajectory of tier-2 cities. Large multinational corporations recognize the potential of setting up operations in these cities as it allows them to reduce costs, access skilled local workforces, and bring significant benefits to the communities in these regions.

This shift not only leads to substantial cost savings and business efficiency for the companies but also taps into the burgeoning talent pools found in smaller cities. The availability of skilled graduates in various fields, including accounting, engineering, and science, enables these firms to improve the quality of services they offer while providing opportunities for local talent to gain exposure to global work practices, fostering professional growth.

One of the most significant advantages of establishing “global capability centers” in smaller cities is job creation and economic growth.

These centers generate numerous employment opportunities for local residents, reducing unemployment rates and improving living standards; the influx of jobs stimulates economic growth, as increased disposable income leads to higher consumer spending, benefiting the entire region.

Moreover, the presence of major global firms in these cities serves as a catalyst for infrastructural development as these firms often require reliable transportation, communication, and utility services, leading to improvements in local infrastructure.
This, in turn, fuels the growth of ancillary services such as food, housing, healthcare, and education, further contributing to the overall economic development of these regions.

The transition of major global firms to smaller Indian cities also brings about positive social and cultural changes as the infusion of diverse talent from various regions and backgrounds enriches the local communities, creating a cosmopolitan environment.
Additionally, the presence of globally renowned companies promotes knowledge sharing, professional development, and the adoption of best practices, raising the overall work culture and skill levels within the region.