Grant Thornton deal shakes up auditor rankings

Grant Thornton’s
mega-merger with Robson Rhodes will place the firm on the brink of breaking
into the top four auditor rankings for total stock market clients, according to
the latest rankings compiled by
Hemscott .

According to the data for the second quarter of 2007, the combined client
numbers of Robson Rhodes and Grant Thornton would total 284, less than 50
clients behind 4th ranked Deloitte, who audit 325 listed companies.

But although the merger has the potential to shake-up total audit client
numbers, it will have little impact on the FTSE350 market and when it comes to
combined market cap the merger will also cause little change.

In terms of total market cap, a combined Grant Thornton and Robson Rhodes
will serves clients with a combined market cap of £17.9bn, substantially behind
the £35.2bn of fourth-placed Ernst & Young.

The merger will also fail to create a presence for Grant Thornton in the
FTSE100 and add only one client to Grant Thornton’s FTSE250 list, taking the
total in this index up to just three, well behind the 45 clients of
fourth-placed Deloitte.

Should there be concern that the biggest merger in the accountancy market
since Deloitte joined up with Andersen has failed to cause a shift in the top
end of the audit market?

Peter Wyman, head of professional affairs at PricewaterhouseCoopers, says
that as long as the market is fluid, there should be no cause for concern.

‘If there is nobody growing and nobody shrinking then we should be concerned,
but we have a well-functioning market where there is movement,’ Wyman said.

The Hemscott figures provide some support for this view. Over just a quarter
KPMG (first for Q2) and PwC exchanged positions in the total client rankings, as
did Deloitte (4th for Q2) and Ernst & Young. There were similar shifts on
AIM, where Grant Thornton edged out KPMG for first place after they were level
in Q1.

The
FTSE
350 market remained static, however. Grant Thornton board member
Malcolm Ward said the firm, headed by Michael Cleary (pictured), would take
longer to break into this space.

‘The Big Four have been investing in this space for decades, so it is going
to take ten years or longer to catch up. But we are investing in offering buyers
more choice and capacity, which the transaction with Robson Rhodes shows,’ Ward
said.

Further reading:

Big Four face fresh scrutiny from US

Big Four engaged in ‘unfair competition’, says Newman

Tackling big four dominance