Competing in the new market

Last week saw fledgling consolidator Tenon reveal healthy interim results.

Turnover more than doubled on the same period last year, with before-tax profits improving almost sixfold – few would begrudge the firm that considerable achievement.

Chief executive Ian Buckley had been forced to spend much of the 12 months to 31 December 2001 merging 12 firms into a single entity, leaving him unable to concentrate on growing turnover and – crucially for its share price – profitability.

But no one would have been more pleased last week to see the firm turn that around than its rivals – Numerica and Vantis. That might sound perverse – surely these firms’ individual successes turn on their ability to differentiate themselves from each other and to capitalise on the perceived weaknesses of rivals?

Well, yes, but that tells only part of the story.

Tenon was placed as the country’s ninth biggest accountancy firm in this summer’s Accountancy Age Top 50 with Numerica at number 16 and Vantis at number 24.

But if they are to continue to perform well and climb the league table they need each other as much as they need their own business acumen.This is a new market. The firms’ clients may bear more than a passing resemblance to previous ones. But the client base is expanding all the time as is their service offering.

Each of the firms is looking to carve out a real alternative to the Big Four. And they all want to offer their employees real incentives in terms of shares as well as offering clients a flexibility that is unheard of under the traditional accountancy firm’s partnership structure. What they cannot offer is audit, though they do this through associated firms that often share the same office but not the same name.

This has already proved controversial – but is the model any less robust than the partnership, one-stop-shop model?

Again, should one find a way of resolving this issue once and for all, others will follow suit. And don’t be surprised if other firms seek to list either. Even as you read this there will be meetings going on in smoke-filled rooms to discuss that very eventuality.

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