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22 Dec 2009
Accounting marriage brokers Jobtel predicts two new listed consolidators could join the public markets in the next two years.
The broker, which helps merge firms, said that Tenon's acquisition of RSM Bentley Jennison was a sign that the markets were prepared to back accountants' growth.
Two new consolidators could enter the market by 2011.
Jobtel director Julian Hamilton said: "There appears to be a strong movement within the City to encourage a more competitive environment amongst the top accountancy firms - not only to keep a check on fees charged to clients but to provide some relief from the now famous 'too big to fail' scenario - where the governor of the Bank of England, no less, decried his inability to let market forces get to work and that he felt constrained to support banks which should otherwise have collapsed due to their own mismanagement.
"In that respect its probable that the emergence in time of a 5th top accountancy practice would be viewed favourably by the financial regulators. It seems likely that one way this further consolidation might take place is through mergers funded by the City."
Hamilton was involved in Vantis' launch.
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Visitor comments Add your comment
I couldn't disagree more strongly
The gap between the Big (Final) Four and the rest is too great even for the next few firms in the top ten to bridge. There is NO prospect of a new consolidator growing to a sufficient size to compete with the Big 4 in the forseeable future. It's fanciful to suggest otherwise.
The biggest firms are structured and staffed so as to be able to undertake audits in a way that smaller firms cannot replicate. And the larger clients of the big 4 have been notoriously reluctant to switch to even an established top ten firm let alone a new untested entrant that is simply an amalgamation of smaller firms.
And don't get me started on the absence of a financial incentive for anyone to invest funds in an aggregation of accountancy firms whose profits will shrink post consolidation. Why? Well all partners' profits shares will become salaries and subject to 13.8 NICs. This additional cost will dwarf any hoped for cost savings. And then the investors will want a return on their money - and the partners will want to secure more income and capital growth. On what basis can the numbers ever make sense? The only way is if the hope of long-term capital growth is a sufficient motivator. I can't see it happening myself.
Posted by: Mark Lee, Chairman of the Tax Advice Network, 22 Dec 2009 | 00:00