Mergers and acquisitions broker Jobtel, which specialises in accountancy practices, has written to senior partners of firms with turnovers up to £10m seeking to create a domestic consolidator to fend off the consolidators that have swept across US practices in recent years.
For once the mid-tier can relax. After a flurry of merger activity, the firms from numbered six to 30 in terms of fee income in the Accountancy Age Top 50 are unlikely to be attracted by consolidation in the form of tie-ups with the likes of Amex, H&R Block, Fiducial or any UK pretender.
For most managing partners of these firms it will be a relief after a strange 12 months that saw merger activity reach fever pitch. BDO Stoy Hayward merged with Moores Rowland but the planned tie-up between Pannell Kerr Forster and Robson Rhodes unravelled. For a time it seemed everyone in the mid-tier was being linked with someone else.
It easy to understand how both rumour and activity snowballed. The attractions of mergers are obvious: economies of scale and a higher profile as a bigger, apparently better firm are chief among them.
But there are drawbacks if it is not done right. 'It's often a good idea in the mind of a senior managing partner,' cautions the senior partner of one mid-tier firm. 'But it is the culture and the focus on the client that's important.'With that in mind mid-tier firms are beginning to regroup. In the summer it seemed that everyone wanted to become the next PricewaterhouseCoopers - or at least the biggest firm outside the Big Five. Now, it seems, independence, specialisms and client focus are the name of the game.
Two firms that would sign up to this charter are Pannell Kerr Foster and HLB Kidsons. PKF saw its fee income jump by 8% last year - a respectable if not startling increase in the year that its marriage to Robson Rhodes was called off - while Kidsons has just announced a five-year strategy that commits it to a predominantly single life.
Martin Goodchild, PKF managing partner, says the firm's future lies in organic growth and lower-level tie-ups. 'We have achieved particularly strong growth in consultancy and other specialist services and are also regularly winning work in the small to medium plc marketplace and achieving success in a number of niche business areas,' he says.
'Additionally, we continue to reinforce our strong regional presence through a series of local mergers. Pursuing these development strategies will ensure we grow organically and remain competitive while retaining the approach and standards valued by our clients.'Of course that does not mean standing still. 'The key to continued progression and growth has to be investment,' argues Goodchild. 'Developing new products and services that provide added benefits for clients is essential if the firm's prosperity is to be maintained.'
Kidsons, the ninth largest national firm, is making similar noises, having recently unveiled 'From Strength to Strength', a four-year strategy, that places a heavy emphasis on independence and commitment to growth. As a result, the firm will now channel considerable effort into growing the business organically - that word again - by targeting smaller and medium-sized companies in the IT and e-commerce sectors.And again lower-level links are key. To make sure it remains as the best performing firm (in terms of growth) in corporate finance outside the Big Five, it will also be looking to grow through selective local mergers with 'quality accountancy firms throughout the UK.'
With the new strategy it would appear that the firm has given up on the idea of merging with another Group A firm as seemed the case 12 months ago. But managing partner Peter Douglas says this is not necessarily the case. 'We are not completely abandoning the idea of a full merger with another Group A firm but we are certainly not making it a top priority,' he says. 'We have clear goals in what it is we want to achieve over the next three or four years. We will be looking to substantially increase our size both through organic growth and through selective merger growth in particular areas where we feel that growing organically will take longer than is good for the practice. 'We have targets. We are also looking to achieve a £110m top-line turnover from our current £67.6m over the next few years and grow the rewards and returns for staff and partners.'
To achieve those sort of numbers focusing on existing and new clients, not mergers, will be the key. 'Our priority now is to continue to grow the business, and to increase our market share in the SME market,' says Douglas. 'We see ourselves as business advisors with the aim of helping our clients make money and make their business a success, and so we are breaking away from the traditional role of the accountant who was an auditor or preparer of accounts and tax returns.'
That's not revolutionary but in light of the recent climate the lower priority placed on mergers looks like it is. For how long Kidsons and the rest of the mid-tier continue to subscribe to that philosophy remains to be seen.
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