In today’s world of massive accounting firms, most people are familiar with the elite at the top. The four largest globally are known as the “Big 4”. But have you heard of the Big 8 Accounting firms? What you might not be so familiar with is the history of how the Big 4 ended up as the last giants standing in the industry. These firms have roots that go way back, some even to the mid 1800’s.
It takes generations of focused leadership, clear goals and strategy to carry a company through the decades. The sheer size and scale of these firms is impressive. However, today’s Big 4 accounting firms were once known as the Big 8. Through mergers and company failures the Big 4 came to be the largest firms in the management consulting – and accounting – world.
We break down the history of the Big 8 accounting firms so you can better appreciate the Big 4 today.
The Big 8 Accounting Firms History
(Became Defunct in 2002)
Arthur Andersen was an accounting firm based out of Chicago, founded in 1913. It became one of the biggest, most successful firms in the United States. Andersen & Co had lines of business in accounting, as well as a consulting practice. In the year 2000, the accounting and consulting businesses split, with the consulting branch later changing its name to Accenture Ltd, which is now one of the premier technology-focused consulting firms in the world. In 2002 Andersen & Co, the accounting branch, was embroiled in the Enron controversy – the firm was convicted of obstructing justice and barred from providing auditing services. In one fell swoop, a company with 85,000 employees and $9.3B was defunct.
(Now Ernst & Young)
In 1896, Arthur Young started an accounting firm with his brother Stuart, and named it Arthur Young & Company. The new company was one of the first to provide both auditing and consulting services – after all, if auditing is simply looking back at the books, consulting is taking that information to help the company improve its future performance.
The firm flourished in its auditing and consulting business over the years. Young was a believer in professional development of the company and employees, and would recruit and develop talent straight out of universities. After Young’s passing in 1948, the company continued to thrive and grow. In 1989, Young & Co merged with Ernst & Whinney to form Ernst & Young. This new firm today has been rebranded as EY and is known as one of the Big 4. It can boast to be one of the biggest accounting and consulting companies in the world. In 2018, Ernst & Young had over 280,000 employees and brought in over $34B in revenue. They have over 700 offices in 150 countries worldwide.
Deloitte Haskins & Sells
(Now Deloitte & Touche)
in the 1970’s and 80’s, Deloitte Haskins & Sells was one of the Big 8 accounting firms, and was headquartered in the UK. Then, in 1989 the firm merged with Touche Ross in the United States to form Deloitte & Touche. In 1995, the company voted to form Deloitte Consulting, and has since reorganized to create multiple new entities such as Deloitte Financial Advisory Services, Deloitte Tax, and a few more. Today Deloitte is firmly established as one of the Big 4, with over $43B dollars in revenue and over 280,000 employees worldwide.
Ernst & Whitney
(Now Ernst & Young)
In 1989 Ernst & Whitney was the 4th largest accounting firm in the entire world. When the firm merged with the fifth largest firm, Arthur Young, it became Ernst & Young, and later decided to rebrand and operate as EY. Today EY has over 270,000 employees worldwide and revenue exceeding $34B dollars. In recent years, the firm has made expanding the size and scope of its consulting practices a core tenet of its growth strategy.
Peat Marwick Mitchell
With its roots tracing back to the mid 1800’s, Peat Marwick & Mitchell has a long and distinguished history. Peat Marwick Mitchell was formed in 1925 via the merger of William Barclay Peat & Co with Marwick Mitchell & Co. This new firm continued its market dominance, becoming a premier player on a global scale. In 1987, the firm again merged, this time with KMG, creating the KPMG we know today. This merger would be the first mega-merger of large-scale accounting firms. Today KPMG is a Big 4 firm with over 207,000 employees worldwide and annual revenues of over $28B dollars.
PricewaterhouseCoopers, doing business today as PwC is another firm with history dating back to the mid 1800’s. In 1874 a Mr. Price partnered with Waterhouse in London and formed Price Waterhouse & Co. They opened their first US location in New York in 1890. Over the decades the firm gained significant notoriety for its accounting firm practice. Then in 1998 Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers, one of the current Big 4. This new variation of the firm has also become a premier player in the strategy consulting space via its acquisition and rebrand of Strategy&. Today, PwC employees over 200,000 people and generates annual revenues of up to $41B.
(Now Deloitte & Touche)
After merger after merger dating back to the late 1800’s, Touche Ross became a booming accounting and consulting firm through the 20th century. They were one of the Big 8 until merging with Deloitte Haskins & Sells in 1989 to form Deloitte & Touche. This new firm instantly became one of the Big 4 and has continued to expand and invest in new services. Today Deloitte & Touche is the largest firm in the world with over 280,000 employees and $43B in revenue. It’s also the most premier of the Big 4 consulting practices.
Coopers & Lybrand
Coopers & Lybrand was officially formed in the US in 1973, but the firms that merged to create the Big 8 company had been working together internationally since 1957. The three firms that adopted the Coopers & Lybrand were: Cooper Brothers, Lybrand, Ross Bros & Montgomery, and a firm called McDonald. In 1998 Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers.
After The Big 8 Accounting Firms
The Big 8 accounting firms were some of the first truly international professional services firms, and pioneers for the Big 4 of today. Even though none of the Big 8 exist today in their original form, you can still see the major influence they left on the accounting world. All of the Big 4 firms we know today are direct results of these previous firms and what they built.