BusinessBusiness RecoveryOn the money with Gavin Hinks

On the money with Gavin Hinks

Recessions throw up unanticipated consequences

gavin hinks, editor accountancy age

Not so long ago it emerged that many insolvency partners were not actually
capitalising on the boom in business recovery because they were locked into
pre-boom profit deals.

The latest unlikely news is that you can’t sell, or merge, an accountancy
practice for cash.

Let me qualify that by saying my information is largely anecdotal, but it
appears cash is no longer a factor in bringing practices together. If you are in
a small practice and someone comes looking to do a deal there won’t be any money
on the table. Likewise, at least one very large firm has been looking for
smaller practices to acquire and literally all that’s been on the table is
‘rebranding’. No cash, no improved terms just the security of being part of a
much larger organisation with a stronger presence in the market.

The odd thing is that practices approached in this way are generally the
stronger ones that have retained a client base or specialism that is still doing
business. So why would they give up their name over the door without any money
for their trouble. It doesn’t seem to make a lot of sense.

It seems larges firms are attempting to capitalise on a general panic over
the recession helping persuade people they need to seek a safe habour.

But given some of the results in our Top 50 last week, it’s hard to see how
some of the firms could make that claim. As one senior mid-tier partner told me,
he will be amazed to see any significant growth in the current year. Firms are
retaining the volume of clients ­ they just want their fees to fall.

And that’s where the larger firms have an advantage ­ they are more able to
absorb a fall in revenues through economies of scale. Something successful small
firms might lack.

There’s still a way to go in this recession.

Gavin Hinks is editor of Accountancy Age

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