Top 50 - Davids take on goliaths at their own game

If you’re looking for exceptional growth among the country’s largest
accountancy firms, it won’t be the Big Four that catch your eye. No, you need to
travel a little further down our Top 50 list to the number six slot where BDO
Stoy Hayward reveals growth of 23.7%.

That’s well above anything the Big Four can muster and speaks volumes about
where the action is in the accountancy sector. Two trends are clearly emerging ­
the capitalising on the sensitivity surrounding compliance with new regulation
and a rush to make acquisitions and mergers.

In the first case, big companies are having to turn their backs on Big Four
auditors to look elsewhere for tax planning, corporate finance, consultancy and
advisory services.

The misfortune of the Big Four is good news for the mid-tier, as the figures
show. The number five firm, Grant Thornton, reveals healthy growth of 7.3%, but,
significantly, Tenon has growth of 10% and profits up 49%. Robson Rhodes is
performing even better, with turnover up 14%. Haines Watts is up 12%, while our
estimated figures show that Vantis could be up by as much as 25%.

The boon in advice on regulation came after the introduction of the operating
and financial review, a modified combined code on corporate governance and, for
those with a US listing, managing the minefield presented by the Sarbanes-Oxley
Act.

Many speculate that the move to use the mid-tier to duck conflicts of
interest could create its own momentum, to such an extent that these firms are
considered viable alternatives to the Big Four in their own right.

Stoy’s work as auditors and reporting accountants for the £5bn flotation of
PartyGaming, the online gambling site, appears to point to this as a
possibility. More evidence can be seen in Grant Thornton’s aggressive new
marketing campaign inviting potential clients to ‘Think beyond convention. Think
beyond the Big Four.’

But the mid-tier’s performance is also linked to acquisitions. Figures for
both Vantis and Stoy reflect revenue benefits expected from their split of
Numerica, but other mid-tier operators have been on shopping sprees.

Tenon’s figures will benefit from the acquisition of a new office in Rochdale
and tax specialists Premier Strategies. Robson Rhodes should be seeing the
fruits of acquiring RSM Moffat, a specialist IT company. The whopping 38%
increase in the turnover of Bentley Jennison is accounted for by the
acquisitions of WBS in Leeds and Moore Stephens in Birmingham.

While a host of smaller acquisitions may make a difference, the sector is
alive with gossip that a big takeover is now long overdue. A quick glance is
enough to see which firms might be likely targets for those doing well.

The big question for the mid-tier is whether the trends identified here have
the potential to bring about real structural change among the largest firms.
Will another firm emerge to compete with the Big Four? A big takeover or merger
might help hasten that possibility, but it’s still too early to tell from these
figures. The next year could make all the difference.