Grant Thornton swoop heralds merger boom
The industry was anticipating further major mid-tier mergers this week after Grant Thornton swooped for Robson Rhodes and pledged to take on the Big Four
The firm announced the plans on Monday, leaving the mid-tier in a state of
flux.
The merger follows the
Mazars/Moores
Rowland deal last month, and leaves the RSM network still seeking a major
audit firm to partner with the UK.
‘I wouldn’t be surprised to see consolidation in the mid-tier, said BDO chief
Jeremy Newman. ‘But it won’t involve us.’
RSM McGladrey, which was set to bail out its troubled UK counterpart, will
now be looking for a UK firm to fill the gap, it is understood.
Industry consultant Phil Shohet said: ‘McGladrey could start consolidating in
the UK to get an £80m practice.’
Robson
Rhodes is understood to have spoken to several firms about a deal following
the collapse of its McGladrey plans.
The deal, billed as a merger to challenge the Big Four, will add £30m to GT’s
audit revenues, though almost exclusively on AIM. The firm plans to grow
revenues to £500m in three years, and it has warned that ‘efficiencies’ of the
staff structure are in the pipeline.
‘One of our objectives is to win more work in the larger audit market,’ said
a GT spokesman. ‘This will take time as companies don’t change their audit
arrangements on a regular basis.’
The move means Grant Thornton leapfrogs BDO Stoy Hayward to take fifth place
in total revenues. Shohet said he expected to see BDO and Grant Thornton go
‘head to head’.
Newman said this week: ‘We would only look at an acquisition if we were
adding something we couldn’t get ourselves.’
He welcomed the move, but added: ‘The deal potentially and unfortunately
reinforces a view that big is better, but at the end of the day it is a positive
thing.’
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Financial difficulties were key to the deal
Despite talk of the Grant Thornton/Robson Rhodes deal being a mega-merger to
take on the Big Four, industry figures pointed to Robson Rhodes’ financial
difficulties this week being the key to the deal.
Industry consultant Phil Shohet said: ‘There was an air of desperation around
[RSM Robson Rhodes]. The first merger didn’t work out, it has got debt and
reduced profitability, and it has lost some good partners. [Michael] Cleary is a
brave guy.’
Robson Rhodes’ latest accounts, which detailed a loss of £3.8m for 2006, show
bank debts of more than £30m. It is understood that a further £15m owed to
partners will, in part, if not largely, have been financed by banks, leaving the
firm with significant debts. The firm’s turnover was £85m last year.
Robson Rhodes has had difficulties in recent years after growth plans fell
flat.
It was not clear as to why RSM McGladrey, the US firm which had pledged to
help out its UK network partner, pulled out of its proposed deal. Robson Rhodes
managing partner David Maxwell said: ‘ We couldn’t get to an operational
structure and strategy that could be implemented in time for the market.’
It is also unclear what deal Robson Rhodes partners have been offered by
Grant Thornton, with the firm declining to comment on the terms.
To see an interview with Michael Cleary and David Maxwell go to
www.accountancyage.com/tv