The administration of Lehman Brothers’ European arm has swelled turnover at PricewaterhouseCoopers (PwC) and helped it weather a slump in corporate deal-making. The professional services firm banked £100 million (US$164 million) in revenues from the Lehman administration, it said in its annual results, published yesterday.
This offset a decline in advice it provides to companies involved in mergers and acquisitions (M&A), after the shock failure of Lehman a year ago plunged the financial world into chaos and confusion.
“It’s the biggest administration anyone in the world is dealing with at the moment,” a PwC spokeswoman said.
Four PwC partners act as administrators of the UK-headquartered European arm of the collapsed investment bank.
A week ago they said they were preparing claims of up to US$100 billion against the US parent.
They have until Sept. 22 to file claims, which relate largely to past guarantees that Lehman pledged to its subsidiaries. There were also millions of trades left frozen by the bank’s sudden descent into bankruptcy.
PwC UK chairman Ian Powell said: “This year has been one of general economic turmoil and against this backdrop our results represent a solid financial performance as we held our nerve and stayed close to the market and our clients.”
Overall turnover at the firm climbed to £2.25 billion in the year to 30 June from £2.24 billion the year before, with underlying net revenues up 1 percent to £1.98 billion.
Profit available for distribution among PwC’s members climbed by £3 million to £667 million, but the profit per partner fell to £777,000 from £797,000. Powell received the largest slice of profits, at £3.3 million.
The tax and assurance businesses were hit by the decline in demand for M&A transaction advice, with tax recording a 4 percent fall in revenues to £650 million. Assurance was down 1 percent to £861 million, as it also benefited from core audit work being stable and an increase in demand for risk assurance services. PwC’s advisory business offset these declines with 5 percent growth in revenues to £737 million thanks largely to a 10 percent jump in consulting demand.
PwC is the second of the Big Four accountancy firms to report annual results. Its rival Deloitte posted a 2 percent fall in gross revenues to £1.97 billion in the year to May 31. It, too, got hit by the decline in M&A activity, with net revenues down 7 percent in tax and 9 percent in corporate finance, while its audit and consulting divisions enjoyed growth of 7 percent and 3 percent respectively.
Meanwhile, Lehman claimants, including pension holders, will eventually receive a only fraction of their claims after multimillion-dollar receivership and accountancy costs are deducted.
Receivers working on the Lehman collapse say the US$639 billion in assets that the bank had when it went bust last year have shrunk considerably, but to a figure no one can predict as it will take years to unwind the operation.
“It’s pretty obvious you’re not going to recover at par,” said Ann Cairns, managing director of Alvarez & Marsal, the restructuring firm running the administration of Lehman Brothers Holding Inc.
Also See: Why Lehman’s couldn’t be saved
RSS