Kreston North European Conference

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Kreston North European Conference Update on
strategyand current developments22- 24 May
2008, St Petersburg Jon Lisby, Executive Director
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Agenda

• Overall performance in 2007
• Analysis of our growth
• Our current resources
• How do we compare?
• Referral performance
• Regional analysis
• A change in the fee basis
• Network v Association
• Whats our strategy? Where on the line?
• Now, where, how

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Another outstanding year

• 1.708bn Growth 30

1.142bn
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Resources

• 236 (213) firms, 665 (543) offices 92
  (75)countries, 18,500 (15,000) staff

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2007 Recruitment

• Moscow
• Brazil 2 firms
• Dominican Republic
• Ukraine
• Vietnam
• Isle of Man

• United Kingdom
• Guatemala
• Mexico 3 firms
• Australia 3 firms
• 15 new firmsand .

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Exco France

• France
• Africa (former EY)
• Côte dIvoire
• Gabon
• Niger
• Mauritania
• Congo
• Togo
• Benin
• Mali
• Burkina
• Cameroon
• Tchad
• Morocco

• Poland
• West Indies, New Caledonianand Reunion
• Over 2,000 professionals
• Fee income US203m

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Analysis of growth

• 30 growth comprised
• 15 impact of recruitment less retirements
• 15 average organic growth
• Overall organic growth in line with Big 4
• Recruitment of Exco France brings improved
  balance between Eurafne and North America
• North America now 49 previously 60
• Eurafne now 41 previously 29

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Regional strength/recruitment targets(Source
International Accounting Bulletin Surveys 2007)
Membership analysis National position Kreston Growth Average Growth Fee Revenue Kreston Offices Partners Total Staff
2007 USm No. No. No.
USA 12 7 14 836 49 153 305 6649
UK 18 26 13 100 6 23 96 891
Australia 14 46 15 31 2 11 34 251
Germany 17 6 8 79 5 27 55 658
Canada 23 10 11 10 1 5 12 88
China 7 30 23 56 3 59 50 1,590
Netherlands 9 6 7 74 4 20 45 697
France 7 1200 8 194 11 109 139 1,794
Italy 17 -19 11 5 6 6 59
Russia 10 122 49 27 2 6 12 615
Middle East 16 8 19 6 16 15 208
Mexico 11 95 4 12 1 27 49 501
Other 277 16 203 349 4,347
World Total 15 30 20 1,707 100 665 1,167 18,348
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Regional analysis

Region 2008 2007
Fees USm No of Firms Fees USm No of Firms
Asia Pacific 6 110 34 7 93 35
Australia/New Z 2 33 13 2 27 13
Eurafne 41 697 146 29 387 125
Latin America (reunited) 2 23 33 2 20 30
North America 49 845 10 60 791 10
Total 100 1708 236 100 1,318 213
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The Top 10 ( Green up - Red down)

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How do we compare?

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Strength of membership

• Kreston International at start of 2008
• 30 Growth takes us to 15th (21m from13th!)
• 92 countries
• with 665 offices
• 18,500 staff and
• fee income of US1.7bn.

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2008 Recruitment to date

• Belarus(thanks to IEI !)
• Bulgaria
• Central America
• Panama
• El Salvador
• Honduras
• Nicaragua

• Cyprus
• Mexico 6 firms
• India
• Venezuela
• Colombia

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International referrals

• Strong growth in value of reported new referrals
• US1.4m in 2007
• 88 between Europe and North America
• Still too low!

Past 10 years Value 1997/2007
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Referral fees a change
 

• 10 payable by receiving firm
• 5 receivable by giving firm (in respect of
  referrals given after Jan 08 and only payable if
  paid)
• Adjusted on annual fee subscription
• 2 years only
• No fees due on national referrals from 2007

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Network v Association

• Network definition.A larger structure
• That is aimed at co-operation and
• That is clearly aimed at profit or cost sharing
  or shares common ownership, control or
  management, common quality control policies and
  procedures, common business strategy, the use of
  a common brand-name, or a significant part of
  professional resourcesBoth IFAC and European
  8th Directive

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Association - Network
Client acceptance sign off rules
Service lines limited
Network
Global strategies imposed
Ongoing quality monitoring
Shared working practices
Joint purchasing incl. PI insurance
Brand shared
Conflict checks
Global
Forum of Firms
Pro-active joint targeting of prospects
Tight
Profile attracts staff clients
Special interest groups
Technical support Training
More about status than international business
High
Networks within an Association
Increased
Sovereignty
Reactive to client needs
Social and Travel club
Integration
Cost Value
Risk
Association
Cohesive and credible
Local
Loose
Low
Low
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Network definition

• The Kreston strategy? Which option?
• Networks within an Association

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Network definition

• All Kreston members are required to make
  amendments to
• any document, stationery, website, signage or
  promotional material and
• eliminate the word network and
• at all times refer to a global association of
  independent accountants and business advisors.

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(No Transcript)
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Now?

• 15th ( or equal 13th!) largest global group
• Low central cost structure maintained
• Referrals between members driven by client needs
  mainly reactive and little co-ordination of
  working practices
• Excellent global coverage and strong growth but
  with
• Some location gaps
• Need to strengthen service line capability in
  certain locations
• Brand recognition low but growing

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Where to?

• High profile association (including some
  networks) working in closer collaboration to
  proactively win multi national assignments and
  compete more effectively in the marketplace of
  mid-tier accounting networks

The strategy remains..
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The challenge

• Raise the profile
• Increase collaboration
• Proactively target quality international
  assignments
• And win!! Both national and international

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The challenge

• Raise the profile
• Continued growth and admission of new strong
  firms
• National and regional business development plans

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The challenge

• Increase collaboration
• Introduce the tools
• Global web portal - unlimited users
• Share working practices
• Share information extended Fact Sheet
• National and regional development
  strategies(Examples Mexico,India,Australia/New
  Zealand)
• Build multi-firm teams
• Special interest groups (SIG)

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Building collaboration

• Special interest groupsNumerous groups
  including-
• Global audit
• Global Risk and Advisory (Internal audit, Sarbox)
• International tax
• Transfer Pricing
• Corporate finance IPOs, Acquisitions, Due
  Diligence
• Global Payroll

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Building collaboration

• Global audit An update on progress
• Proposal made at Chicago World Conference in
  October 2007 by MHM for a branded global audit
  network
• Objective to complete more effectively against
  BDO, GT, RSM etc
• Many members interested
• No agreement to brand from major North American
  and European firms
• Discussions ongoing and focused on increasing
  capability to target, win and efficiency service
  quality transnational audits
• Las Vegas Conference June 2008

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• Our goals remain ..
• Build cohesion and
• Accelerate the growth of high quality referrals
  bothnational and international
• Build the value of Kreston firms and
• Do more and better business with people you know,
  like and trust!

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Eurafne Conference
Hamburg, 18 -20
September 2008
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World Conference