The news that Levy Gee (Numerica) and BKR Haines Watts both intend to follow Tenon in creating new consolidator groups, reportedly listed on the stock market, signals a desperate conclusion of the flawed, old-style partnership goodwill system. Short-termism has triumphed over the long-term view.
Will these groupings just become ‘roll-ups’ where unintegrated practices are bought and sold on like a commodity? I hope not, but it is a fear, particularly if they are unsuccessful.
One interpretation is that firms are unable to provide succession due to burdensome goodwill payments. Hence, their strategy is driven by the need to get round the significant barriers to entry into the partnership that have been created.
Already I hear you saying: ‘But, he would say that,’ as the head of a mid-tier competitor who perhaps sees new threats to his own firm’s strategy and prospects. I know several partners within these firms and I wish them well, but the consolidation strategy presents some serious issues for the profession.
Independence and objectivity are all important to a profession that operates in such a heavily regulated environment. The pressure of responding to the wishes of external shareholders nurtures neither. Even where no conflicts of interest arise, perception is everything to the client. Already, the professionalism of accountants is under intense scrutiny. We should be focusing on enhancing our professionalism, not on how accountants can benefit from goodwill that, in a number of cases, they have inherited.
Let us not forget that the accountancy profession relies on human capital.
As such, it needs to reward people by offering the opportunity to participate fully in the direction that an individual firm takes rather than with a role as a professional manager at the beck and call of shareholders.
For our part, Mazars remains dedicated to the ‘stewardship’ model of partnership. We reward partners while they are active in the firm but place a responsibility on them to pass the practice on to successors unencumbered by external shareholder interests.
I believe this model is the right one for accountancy professionals and, most importantly, their clients. In my view, it will continue to stand the test of time against the consolidators.
