Every so often an industry undergoes a major change in its structure. A few years ago US funeral firms swept through the UK buying up a host of family owned and run undertakers. Perhaps more memorable was the huge acquisition spree where many of the country's leading financial service firms snapped up estate agents. This often ended in tears - especially for the acquiring company - when such businesses were often sold back to the original owners a few years later at whacking losses.
Does such a prospect beckon for small UK accountancy practices? A couple of weeks ago, Accountancy Age reported exclusively that Jobtel, a mergers and acquisitions broker, was canvassing opinion among small firms to see if there was an interest in creating a domestic consolidator to pre-empt a US invasion.
August Aquila, who has led American Express' acquisition of around 100 practices has been in the UK explaining Amex strategy. Over the last few years many small firms have been pressed by demanding clients, virtually static fee income and increasing investment for technology and practice development. For those, the thought of joining a 'consolidator' to provide a strong management and administrative function, leaving them clear to do the client work, must seem attractive. But many small firms will have no such thoughts.
Research has shown UK practices fall into two groups - those that are unfocused general practitioners and those that have turned, or are turning themselves, into value-added practices.
Through publications such as the English ICA's report Added-value professionals - Chartered accountants in 2005, practices should be aware of the threats and the opportunities for change. The accountancy market is changing. The commoditisation of core accounting and audit services, lower margins and greater competition are facts all firms must deal with. Firms must give up the idea of serving clients who go to them to fulfil regulatory requirements.
Instead, they must create practices where clients seek advice for their business and financial needs. Accountancy practices have to create value and firms are proving you can do that as an independent as effectively as within a grouping. Whether consolidation takes off remains to be seen. But any practice that has not sorted out its strategy and thinks joining a consolidator is the easy answer will probably be disappointed.
Peter Williams is a freelance writer and director of Kato Publishing.
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