Bridging the gap.

Recent months have seen little abatement of rumours of mergers and consolidation in the profession’s mid-tier. True 1999 was not as busy in this respect as the previous year. Plans to merge Robson Rhodes with Pannell Kerr Forster stumbled last April, for instance, and the refrain from senior partners across Group A has tended to be that while not actively seeking to merge, favourable offers from potential partners would be taken seriously. But this does not mean the issue of restructuring and consolidation among medium-sized firms has gone away. Far from it, in fact. A particular focus of the last six months has been the role US-style consolidators – whereby listed companies enter into agreements to co-own and dual-brand accountancy practices – might play in the UK market. American Express, for instance, has signed more than one hundred such deals. August Aquila, president of American Express Tax and Business Services, predicts that Amex will hold 30% of the accountancy market in the US by 2005. Fellow consolidator H&R Block says that it will grow from 3000 staff to 10,000 employees by 2005. The entry of Amex or other consolidators bent on creating a UK-wide brand in the domestic market has been mooted for some months. Merger and acquisition broker Jobtel has been courting senior partners across the mid-tier and among smaller partnerships since November. In March, stockbroker Raphael Zorn Hemsley launched Tenon with capital funding of #50m. And the ambition of Tenon’s new chief executive is to grow to a turnover of #100m in two to three years. Responses from mid-tier firms have been lukewarm at times. But with the mid-tier dividing #1bn-worth of business, things are unlikely to stand still for long. And the injection of private capital and IT resources to streamline administrative functions, leaving firms free to focus on clients, has attractions. Julian Hamilton, director of Jobtel, says: ‘All firms are going to be under pressure to be more commercially-led. There’s going to be less professional prudery and more advice given across a broader range of topics. There are going to be more offerings across areas such as consultancy and IT where many firms are traditionally weak. Very seldom do they have uniform strength across all areas. Commercial money is going to come into the profession.’ And it is the profession’s good standing in the business world that will facilitate this. ‘All this is due to the very good reputation of accountancy in the UK,’ he says. But whatever the outcome of these initiatives – the message is clear. Client focus is the only strategy to have and firms that aren’t building business models around this imperative will lose ground fast. ‘It’s often a good idea in the mind of a senior managing partner,’ cautions the senior partner of one mid-tier firm. ‘But it is the culture and the focus on the client that’s important.’ And PKF’s managing partner has also declared the firm’s future lies in organic growth with a concentration on niche and specialist areas. Growth through mergers or selling out to a consolidator are not the only options. Independence, specialisms and client focus are emerging as firms’ watchwords. HLB Kidsons, for instance, has announced a five-year strategy, and managing partner Peter Douglas has reaffirmed the practice’s commitment to staying single and independent. Last year’s winner Mazars Neville Russell caught the judges’ attention for its 1998 cross-border merger. Merging Neville Russell with French firm Mazars Guerard provided the mid-tier firm with new opportunities in Europe. One judge said this approach was ‘light years ahead in terms of exploring the issues and coming up with solutions for their clients. They’ve obviously won a lot of business that they would not have won as Mazars or Neville Russell and it puts them into a competitive position, which in some ways, is similar to that enjoyed by the Big Five.’ Derek Smith, UK managing partner, says: ‘If a client regards your service as a cost, then all you can do is compete on price with other firms. Because we constantly look for new ways to add value to the services we provide, our clients regard us as a key component of their business success. That is one reason why we keep winning awards.’ This year, our Medium Firm of the Year award is open to all firms outside the Big Five with more than 15 partners. The judges will be asking entrants to provide information on their UK activities. In particular, they will want to know how the firm has added value to its clients. Submissions can include case studies, which may be anonymous, and should demonstrate how the firm across all areas has helped give its clients a competitive advantage. The judges will also be asking how firms have developed structures to improve client focus, effectiveness and innovation and how financial performance has improved over the past year. – For an entry form visit www.AccountancyAge.com A MESSAGE FROM OUR SPONSORS: NAVISION SOFTWARE Navision Software is a leading international provider of e-commerce integrated enterprise business solutions for mid-sized businesses. Navision is designed to provide an array of solutions that automate and enhance various business processes for customers across a wide range of company sizes, industry and geography. Navision Software has more than 39,000 installations worldwide in 89 countries and 24 country-specific versions. EVENT DETAILS Entry is free Closing date for entries: 28 July 2000 Ceremony: 1 November 2000 Venue: Natural History Museum, London Accountancy Age is happy to have won the backing of all five major accountancy bodies again this year along with a host of other key players in the accountancy profession. As well as the presentations, the evening will provide an excellent opportunity to meet leaders of the accountancy world. Bookings for tables open this week and you can reserve your seat at the profession’s top event of 2000 by dialling 020 7316 9539 or e-mailing: [email protected] For an entry form visit: www.accountancyage.com. ?: