Reanda offers hope in accounting jungle
Company is showing the smaller outfits how to survive and flourish in the face of some very powerful and influential worldwide competition
Reanda’s soured marriage to BDO highlights a typical problem in the accounting world, where smaller players give up their independent decision-making powers to adhere to big accounting networks’ rules and, in return, enjoy the benefits of the networks’ brand names and reputation.
Unknown to many, the “big four” accounting companies — KPMG, PwC, Deloitte and EY — are not single entities, but networks of many accounting companies that collectively use the same name. Clients would not know the difference, since the service they receive has consistent standards.
The likes of KPMG, PwC, Deloitte and EY invest a large amount of money to manage their network companies and ensure consistent service standards. This investment is recouped when member companies pay the network a licensing fee for the use of its name.
Reanda, a Chinese accounting company founded in Beijing in 1993, made a decision to internationalize by joining one such network in 2002. It chose BDO, which ranks just behind the big four in the “second tier” accounting network category, alongside the likes of RSM and Grant Thornton.
But when Huang’s team realized that Reanda and BDO had different values and approaches, they went separate ways.
“After we left BDO, we found ourselves at a crucial junction. We had to make a decision about our future,” he says.
“One option was to join another international network, but similar problems might occur. We could also have sold our company to an international accounting firm, which would return a lump sum payment to our partners in return for our years of hard work, but we felt Reanda had so much potential and we didn’t want that to be the end of the brand.”
In the end, Reanda made the decision to start its own accounting network, the first Chinese accounting company to do so.
“Starting and managing our own network means we make the rules,” says Huang.
The Reanda International Network, started in 2009, has since grown to include 31 member accounting companies in China and overseas.
The network’s member companies generated more than 1.2 billion yuan ($190 million) of revenue in 2017, making it the 20th-largest accounting network by revenue globally. Reanda International Network’s member companies employ almost 4,000 people.
Reanda International’s member companies are in markets including the UK, Italy, Portugal, Cyprus, Germany, Australia, India, Kazakhstan and Madagascar. The network hopes to expand to include 40 member companies by 2019.
Although Reanda Certified Public Accountants is still based in Beijing, the Reanda International Network’s headquarters are in Hong Kong. The network, which operates as the parent company for all international member companies, collects licensing fees from overseas members, as well as referral fees when member companies in different jurisdictions refer work to each other.
It has had a presence in the UK since 2016, when the British accounting company Grunberg & Co, which was founded in 1990, joined its network and adopted the name Reanda UK.
Reanda UK employs about 70 people and provides accounting, auditing, tax and consultancy services.
“Joining the Reanda International network helped us to become more international, and capitalize on opportunities provided by Chinese companies expanding into the UK,” says Robert Bean, managing partner of Reanda UK.
Since joining the Reanda International network, Bean’s team has started advising more Chinese clients, thanks to growing UK-China trade and investment relations. Revenue growth has led to new hiring, and this year Reanda UK moved into two new offices, in North London’s Colindale and in Central London’s Moorgate.
Despite the strong growth, Huang acknowledges that Reanda International’s overseas expansion still faces challenges. Compared with the big four, Reanda International has a smaller budget for staff salaries, which makes it harder to attract top talent. Its shorter history results in a less-known international reputation, which also makes securing big client deals more difficult.
Reanda International’s revenue of $190 million also pales when compared with the big four. Deloitte’s 2016-17 financial year revenue, for example, was $38.8 billion, and PwC’s was $37.7 billion.
The less famous brand name of Reanda International is also demonstrated by Grunberg & Co’s hesitation to completely give up its own name, which was already familiar to old clients. Grunberg & Co’s logo is still seen on its building and the company’s marketing material.
Reanda International has given Grunberg & Co four years to phase in a more consistent Reanda- only branding strategy, although details are open to discussion. Reanda International’s other international member companies are also in a similar situation.
“We understand their concerns,” says Huang. “Giving up an established brand to adopt our brand is a leap of faith in our future development. Hopefully, one day, when Grunberg & Co generates more revenue from new Chinese clients than its existing clients, the branding transition will come willingly and naturally.”
The big four accounting networks normally enjoy brand consistency because smaller companies derive far more benefit from adopting the new name. But this luxury is not so much enjoyed by even the “second tier” of accounting networks. For instance, Reanda itself was branded as Reanda BDO between 2002 and 2007 when it was a part of the BDO network.
Reanda International currently belongs more in the ranks of the “third tier” of accounting companies, in Huang’s view. However, it does enjoy some unique advantages and opportunities. One is its understanding of the mindset of Chinese companies, which is particularly useful when advising these companies’ overseas expansion.
“We enjoy the unique advantage of having both a deep understanding of Chinese business culture and also local expertise in each international market we are present in,” Huang says.
Strategically, Reanda is focusing on establishing more member accounting companies in countries along the regions covered by the China-led Belt and Road Initiative, which aims to grow connectivity between Europe, Asia and Africa through infrastructure investment. Chinese companies have been actively trading and investing in these countries.
“Since many Chinese companies are still in the early stages of their overseas expansion, we feel that as a Chinese accounting network, there is a sense of responsibility to support their international activities in the best possible way,” Huang says.
“In return, we will look to establish a solid reputation internationally. Successful exportation of high-quality Chinese accounting services makes us proud, and changes people’s perception of the historically cheap, low-quality ‘made in China’ image,” he says.