A blow for consolidator model

Remember how stock market listings brought liquidity, hiving off audit brought transparency, while issuing shares to partners offered the soon-to-retire a potential lucrative exit route from the profession?

With the announcement on Monday that BDO Stoy Hayward is in talks to buy Numerica, that vision now sounds somewhat fanciful.

It is easy to see what attracted BDO to the two-year-old business. Nine acquisitions helped Numerica to fourteenth in this year’s UK Accountancy Age Top 50. If the bid from sixth-placed BDO is successful, the merged business would leapfrog Grant Thornton into fifth place. Put simply, BDO would become, in one fell swoop, the biggest firm in the UK outside the Big Four, giving it real muscle in the all-important mid-corporate and lower-end plc markets.

Little has been said so far about how much money (cash or a promise) would change hands – but it would have to be significant to seal the deal.

Following Monday’s news of the (possible) bid, Numerica’s share price surged 42% to 56.5p, making it the market’s second biggest riser that day. Reports suggest a bid of around 60p a share would be persuasive, valuing the company at more than £30m. Sounds healthy if you ignore the fact that the firm listed at 100p.

The rise comes when the three listed consolidators – Tenon, Numerica and Vantis – have been more used to seeing their share prices head south than north. And those other firms benefited too. Vantis crept up to 110p, while Tenon leapt 8.7% to 31.25p on the day.

The BDO-Numerica merger is no done deal, though Numerica chief executive Tony Sarin was making positive noises this week, saying that the two organisations were well-suited. He cautioned, however, that a deal would only be signed if it made sense for shareholders, employees and clients.

It is the timing of the talks that will surprise many. Though one of the motives of the consolidator model was that it offered an exit route for partners, few saw that exit coming quite so soon. Sarin is unrepentant, saying, pragmatically, that you have to look at opportunities when they arrive.

Of course, BDO may not end up acquiring Numerica. And even if does, it does not necessarily signal the end of the consolidator model. But it is hard to view this week’s events as anything other than the old guard kicking sand in the face of the new.

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