Mid-tier ‘needs outside investment’ to expand

Baker Tilly has become the last top ten accountancy firm to convert to an LLP
structure, the firm told Accountancy Age this week as its managing
partner said that mid-tier firms would need outside investment to challenge the
Big Four internationally.

Announcing the details of a structure that leaves the firm open to pursue
both European mergers and also equity finance, managing partner Laurence Longe
said: ‘If you are going to run an international firm then you are going to need
investment in infrastructure, training, and in quality control. The timescale
for return on those investments is long. If you are going down an international
[expansion] you are going to have to go down that [equity finance] route.’

Baker Tilly has opted for separate LLPs for its business divisions, with an
LLP above that for the firm as a whole and then a holding company above that.
The holding company could be used for either European mergers or for raising
equity capital.

LLPs were introduced in the late 90s to protect firms against huge liability

The issue of investment in accountancy firms is currently being looked at by
the European Union. FRC chief executive Paul Boyle has already expressed support
for the idea as a way of breaking the stranglehold of the Big Four, and the EU
has hired Oxera to look into prevailing practice on audit ownership, commonly
restricted to qualified accountants, across the EU.

Baker Tilly is well-positioned to challenge the Big Four, with the largest
audit revenues outside the top four firms.

Longe also suggested if a single regulatory climate was introduced across
Europe, there would be more motivation for firms to form networks. ‘If KPMG are
successful it will be in everybody’s thoughts.’

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