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Is big always better?

AS A STRONG middle three starts to emerge and pull away at the top of the mid-tier, the question that many managing partners are asking themselves is, “is big always better?”. In fact, Laurence Longe, Baker Tilly’s managing partner is recently on record as saying “firms need the scale if they want to compete to provide client services. Size is a necessary condition”. So, is Longe right? Does size matter in today’s accountancy marketplace? 

One-way to gauge whether ‘big is always better’, is to look at the percentage growth of the top 50 versus the +50. In this year’s table, there is no evidence that the Top 50, or any ‘top’ slice of firms is out-performing the rest of the table.

There are winners and losers pretty evenly spread throughout the whole table. In fact, the 10 firms with the higher percentage growth are equally split between the Top 50 and the +50 firms. Expanding this list to include the top 25 firms, with 15 firms being in the top 50 and 10 firms being in the bottom 50, also shreds no statistically significant light on whether big is better.

With a firm’s percentage growth being a lousy indicator of size of firm, it’s time to look at this year’s winners and losers in a little more detail. Interestingly there are some trends and patterns emerging. Most firms seem to be choosing one of three options for growth; consolidate through mergers/acquisitions, diversify or specialise.

The firms who have grown the most in the last year, i.e. the big winners in the table, have all chosen the specialise option.

For example:
• Corporate advisory and business restructuring specialists, Zolfo Cooper, posted an eye-watering, and largest percentage growth of all the top 100 firms, 53.9%, to debut on the table at no. 18.
• ClearSky Accounting, which specialise in the needs of contractors and freelancers entered the table at no 87, with 42.74% growth, the 2nd largest growth in the table.
• Harrisons, the insolvency specialists featured on the table for the first time with a 24% annual growth in fees.

Some of the firms which have chosen the diversify route, are making this strategy work for them:
• Bishop Fleming, which ranked 40 in the table has achieved 23% growth with an investment in specialist service streams such as, VAT consultancy and grant services.

Although, these highlighted examples are in the minority. In the main, the top 100 are sticking to the widely believed ‘best’ strategy for growth, i.e. consolidating via mergers and acquisitions. It is too soon to tell whether the two top of the table mergers, BDO/PKF and Baker Tilly/RSM Tenon are matches made in heaven. However, many of this year’s high growth practices, such as Dains and MacIntyre Hudson, have boosted their growth by buying reasonable sized practices.

There are clear winners and losers in the table. As the recent fortunes of RSM Tenon have demonstrated, big is definitely not always better. In my opinion, the firms which will enjoy a sustained period of growth over the next few years, are those which will have invested in a market-leading specialisation or niche.

Heather Townsend helps professionals become experts. She is the co-author of ‘How to make partner and still have a life’, and the author of ‘The FT Guide To Business Networking’.

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