Baker Tilly International CEO Francesca Lagerberg has been presiding over the accounting firm network for over a year and overseeing growth at a time when some of its Big Four rivals seem to be retrenching on their staff numbers.
Lagerberg, based in London, has over 30 years of experience in professional services and was formerly global head of tax at Grant Thornton and the tax faculty at the Institute of Chartered Accountants in England and Wales until she took the helm at Baker Tilly International in June 2022.
In February, Baker Tilly announced that the firms in the network saw revenues collectively grow 13% to $4.66 billion, making it the ninth largest accounting firm network in the world.
“We’ve had lovely growth, and it’s been right across all areas, so we’ve seen growth and audit, tax, advisory and legal,” said Lagerberg. “Sometimes you’ve got one service line driving the growth, but it’s been a very positive period of time for professional services. We’re quite excited about what’s to come. You’re beginning to see a real movement taking place in our sector. People need advisors. People need people to help them with all of those core service lines, so it’s been a very successful period of growth.”
Baker Tilly International was formed in 1988 and has grown to span 148 territories, with more than 39,000 people. Lagerberg is the first woman to lead the global network. All regions of the network showed expansion with Latin America being the fastest-growing region at 23%, followed by North America at 16%, and the Asia-Pacific and EMEA regions both at 10%. Combined revenues in North America surpassed $2 billion and in Asia-Pacific $1 billion for the first time.
“We’ve had significant growth in the U.S., where our main Baker Tilly US firm has had extraordinary growth over a sustained period of time, over the last four years,” said Lagerberg. “But we’re seeing growth everywhere, and I think that is quite reflective of where professional services firms are going. You see a good range of growth in the Asia Pacific countries where some of the economies are still very buoyant. The only part of the world that perhaps has slower growth is that mature European region where I think the economies have been more impacted by a range of different things. They’re just more mature markets. You don’t tend to see the stellar growth figures that you see in other parts of the world.”
She hopes to expand the network further. “We’re always looking at opportunities,” said Lagerberg. “That might be a build on what we’ve already got. We actually cover pretty much all of the world if you think about the 190-plus countries in the world. We continue to service everywhere already, so it’s not so much a geography play for us. It’s more about strengthening our capabilities, and what we’re really looking to do is be strong where our clients need us to be strong. That’s financial cities all around the world. That’s various parts of the world where we might already have a good presence, but we know we need to continue to get deeper and broader capabilities there. We’re always actively looking for good fits.”
In addition to the firms in the network growing their audit, tax and advisory practices, some are also able to provide legal services in some countries. Lagerberg is seeing revenue increases there as well, although on a percentage basis, legal is a relatively small share.
“I think tax is slightly better than some of the others last year, but it’s a really small difference,” she said. “I think that’s reflective of the fact that professional services are doing very well in all areas, and we’re a multidisciplinary firm, so we do have a strong legal practice. We now have a sizable number of lawyers in our midst. But we also saw growth in the traditional audit area as well, and of course, advisory, which is a real sort of smorgasbord of businesses that fall under the advisory banner. Pretty much all of them did well in the last year. That’s a good indicator that people want to get back to doing transactions and are interested in growing their businesses, and we’re there to help them.”
Nevertheless, some of the Big Four firms have been laying off people this year, especially in the advisory practice, because there haven’t been as many IPOs or M&A deals happening this year as interest rates keep rising. Last month, KPMG cut about 5% of its U.S. workforce after laying off nearly 2% in February, or nearly 700 people. Ernst & Young cut 3,000 jobs in the U.S. in April, or close to 5% of its workforce, after calling off the global split of the EY network (see story). Deloitte also cut 1,200 jobs, or 1.5% of its U.S. workforce in April, according to the Financial Times and Reuters. Grant Thornton laid off approximately 300 employees, or about 3% of its staff, in May, mostly in the advisory and tax business lines. PwC, on the other hand, said its U.S. firm hasn’t been doing any layoffs, according to The Wall Street Journal.
“There’s a little bit of rightsizing going on in the market, particularly in the U.S. for sure,” said Lagerberg. “Probably not a surprise now as we’re coming off the back of COVID and things are getting back to whatever the new normal is going to be. I think you are seeing a little bit of a resizing, particularly in the advisory sector where certain things looked like they might take off, but didn’t quite go as far or as fast as expected. In the greater scheme, you have attrition at all levels, but you’re seeing a little bit more in that space. It’s pretty traditional in the cycle that we’re in, but there’s also an enormous demand for growth in things like audit and tax. There’s still a real need to have great talent in those core service lines as well.”
War for talent
She is still seeing a war for talent going on in the accounting sector, with the profession facing challenges attracting young people to join. “Good-quality people are in demand, whichever country or service line you’re in,” said Lagerberg. “One of the things that perhaps is a challenge for us as an industry is selling the advantage of doing accounting, becoming a CPA or an ACCA, or whatever the recognized qualification is in the country. A lot of people are looking at other professions, and that’s a real opportunity for us to showcase just what a great profession it is going into accounting.”
People who enter the accounting profession often branch out into other areas, Lagerberg pointed out, and firms are recruiting more widely now to attract staff.
“A really important thing is making sure that in the war for talent, that we’re really clear about the opportunities that are there for people, whoever they are, whatever roles they’ve got,” she said. “They don’t just have to be traditional accountants these days. There are some fantastic programs around social mobility to help people come into our market who might previously have thought it was closed to them, and then the continuing need to showcase that whoever you are, whatever gender you are, whatever race you are. It’s a diverse and inclusive profession, and there’s a chance for everybody to reach their full potential. A lot of it is showcasing that accountancy is a phenomenal profession for someone to come into and what it can mean for their career.”
She is still seeing accountants working remotely and in hybrid arrangements at the firms in the network. “Hybrid is still huge,” said Lagerberg. “We look at 140-plus countries in our network, so you’ve got very different things happening in different parts of the world. But as a generalization, a lot of people have realized that hybrid is incredibly helpful for their lives, for their balance, for their families, for their whole just working ability. We are very flexible about people’s working arrangements wherever we can be. And obviously, you need to make sure you’re doing something that’s great for the clients and fits with them. But most clients in many parts of the world are working in a hybrid way too. That’s a happy marriage of similar approaches. I think the new normal is going to be very different from the old one of come into the office five days a week and sit in a place, perhaps on the phone or on a laptop. It’s a chance for people to work in a different way that’s very conducive to a good working life, providing you can make it fit with your clients.”
ChatGPT and AI
She doesn’t think accountants will need to worry about generative AI programs like ChatGPT and Bard replacing them.
“The reality of generative AI is hugely exciting, with massive opportunities for how it can be used, particularly in taking away some of the more routine elements of work, which makes people more efficient and more effective, and they can concentrate on higher-value work,” said Lagerberg. “I was talking to a very big software supplier last week, and they were saying what they’re seeing is people really focusing on the basics, using generative AI to do the basic foundational stuff, as opposed to replacing that amazing brain power of a qualified accountant. I suspect that’s exactly what we’re going to see: humanity and robotics working hand in hand, and that feels like a really good marriage of great technical support alongside human judgment.”
Another trend she has been watching is consolidation of firms and the increasing role of private equity in acquiring a stake in them, funding expansions as they continue to merge and acquire other firms, giving them a wider geographic reach.
“It’s interesting to see the consolidation taking place in our market,” said Lagerberg. “Everyone is realizing that having a global reach and a local understanding has a huge impact. Can you offer depth and breadth in your network, which we like to believe that we can, and how important that is. Apart from firms that are wholly domestic, the days of being part of a network that can’t offer that kind of coverage is becoming more limited as the global reach becomes more important to clients who are keen to do cross-border work. It’s intriguing to see the consolidations that are happening and the influx of private equity into our market and how that is changing people’s perceptions. Overall, the future is incredibly encouraging. Really good businesses want really good advisors, and that’s where professional services truly come into their own.”
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