Ｍｅｒｇｅｒ Ｓｔｏｒｍ ｉｎ Ａｃｃｏｕｎｔｉｎｇ Ｆｉｒｍｓ

The accounting firms in China, both foreign-funded and domestic-funded, began to change the situation of Chinas accounting industry by starting a storm of mergers.

From this year, the global Top 4 accounting firms (KPMG, PricewaterhouseCoopers, Ernest & Young and Deloitte & Touche) all began to speed up in setting up the branch firms in China. At the same time, the domestic-funded accounting firms in China began to accelerate their mergers and acquisitions. Those could bring a lot of changes to Chinas accounting industry.

According to the Business Report in 21st Century, Deloitte & Touche (D&T) declared on December 9 that it set up its 11th branch firm in Hangzhou. Two weeks before D&Ts declaration, PricewaterhouseCoopers (PwC) set up its 13th branch firm in Ningbo, Zhejiang.

The domestic-funded accounting firms also began their actions. Ascenda Certified Public Accountants which was incorporated by Xiamen Ascenda Accounting Firm, Zhongzhou Guanghua Accounting Firm and Huazheng Accounting Firm (both are based in Beijing) said in November 2008 that it merged Chongqing Ascenda Accounting Firm. There used to be seven accounting firms named Ascenda based in different provinces or municipalities in China, but now only the firms based in Zhejiang and Liaoning are still independent companies.

Those combinations, in addition to the combination of the two accounting firms respectively named Zhongrui and Yuehua at the beginning of this year, have changed the rankings of the list of Top 100 Accounting Firms in China. The list will be issued by the Chinese Institute of Certified Public Accountants in 2009.

Faster Expansion of Foreign Firms

On November 27, 2009, PwC opened its 13th branch firm in China. Then D&T chose Hangzhou as the location of its 11th branch firm in China. In truth, besides setup of branch firms, D&T also merged two Ascenda accounting firms based in Beijing and Shenzhen in 2005.

Ernest & Young (E&Y), also one of the global Top 4 accounting firms (hereafter “Top 4”), not only increased the number of its branch firms in China from 10 to 14, but also officially took E&Y Dahua which it merged 7 years ago into the operation system of E&Y China. That means E&Y may replace PwC to become the No.1 in the business scale in China.

Another member of “Top 4” KPMG set up its 12th branch firm in Nanjing in June 2008 and now is planning to open its 13th branch firm in Zhengzhou, Henan.

Quicker Integration of Domestic Firms

It is mentioned above that Ascenda Certified Public Accountants merged Chongqing Ascenda and now there are only two independent Ascenda accounting firms.

The Ascenda group was formerly consisted of 6 accounting firms in June 2002. However, it was only a loose group for the 6 accounting firms cooperation was limited to the professional regulation and business coordination in the accounting field. In July 2004, an accounting firm based in Hong Kong joined in this group, making this group reach its summit.

However, its heyday only lasted for less than one year. In 2005, D&T merged the two Ascenda accounting firms based in Beijing and Shenzhen. Then the accounting firm based in Hong Kong was merged by a domestic-funded accounting firm-Shinewing Certified Public Accountants. The Ascenda group lost three members in a short time.

Among the left four members, the one based in Xiamen was the first one choosing to develop their business in other provinces than Fuzhou. In January 2007, Xiamen Ascenda merged another two accounting firms named Zhongzhou Guanghua and Huazheng. The new accounting firm was ranked No.12 in the list of Top 100 Accounting Firms in China with the total income of 160 million yuan (USD 22.9 million). Then in June 2007, the new firm made another accounting firm based in Hong Kong become its branch firm in Hong Kong.

In July 2008, the companys name was changed into Ascenda Certified Public Accountants and in November 2008 it merged Chongqing Ascenda. After this merger, Ascenda Certified Public Accountants is the No.5 domestic-funded accounting firm in China with the fortune of 200 million yuan (USD 28.6 million).

Before 2008, Shulun Pan Certified Public Accountants (Shulun Pan) has always been the top domestic-funded firm in China. In 2008, RSM Certified Public Accountants became the No.1 after the former No.2 Zhongrui and former No.5 Yuehua joined together to be RSM.

Mergers to Be Continued

Frankly speaking, the keynote of the ten years development of Chinas accounting firms is the mergers and acquisitions. In the recent four years, more and more cases of mergers and acquisitions happened.

Along with the mergers and acquisitions, the list of Chinas Top domestic-funded accounting firms changed every year. However, none of them can challenge the leading place of the “Top 4”.

It is forecasted that the Top 4 accounting firms in China are E&Y, PwC, D&T and KPMG. The fifth one, if nothing unexpected happens, should be RSM. And Ascenda may enter Top 10 after the merger of Chongqing Ascenda.

According to the data, the “Top 4” takes 55.45% of the total income of the Top 100 accounting firms in China. This is because the “Top 4” have many super Chinas state-owned enterprises as their clients.

“The mergers will be continued. This is a good way for us to narrow the gap with the ‘Top 4,” said a director of one of the domestic-funded accounting firm.