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The New Consolidators? Observations on accountancy structures, capital and consolidation.

June 28, 2022

AGN Global Business Voice: AGN Thinking.

Is consolidation different this time around?

The one thing that pretty much all senior partners of accountancy firms can agree on–across the world – is that they are facing a recruitment challenge, that there is a dearth of high-quality accountancy professionals, and the impacts of technology are ever-increasing.

Talent and technology challenges are key issues but not the only factors that have been driving the current trends of accountancy sector consolidation. In this article, AGN GBV digs deeper into factors driving market consolidation and ‘external’ equity injections.

In the US, a new top 10 firm has emerged; the FORVIS brand has been launched as a result of the merger of BKD and Dixon Hughes Goodman. In addition, New York-based IPA 100 firm Marcum LLP ($689.1 million) is merging with Friedman LLP ($144.7 million) – the combined business operating under the Marcum brand.

In the UK, we’ve witnessed Azets (formerly Cogital), expand through the acquisition of a range of medium-sized firms cross-border to become a GBP500m ($650m) top 10 player. Internationally, we’ve seen the accountancy networks hoover up key firms in a range of major markets. Nexia International has entered the list of top 10 global networks with its bold ambition to be ‘top 10’ in all major commercial centres.

There are many others active around the world; for example ETL in Germany, The Kelly Group in Australia etc.

Haven’t we seen it all before?

In the 1980s globalisation of major public companies drove international players to consolidate in order to match the scale of their clients. In 1989 the “Big 8” became the “Big 6”, then 5 with the merger of Price Waterhouse and Coopers & Lybrand in 1998, and latterly 4 on the demise of Arthur Anderson in 2002. A consolidation is largely driven by market forces.

However, in the UK in 1999, a different funding model for accountancy firm consolidation emerged. Tenon was born with a listing on the Alternative Investment Market – raising £50m. Tenon quickly acquired some 16 firms around the UK. It was followed by Numerica in 2001, and Vantis in 2002, both AIM listed and both acquired a range of regional firms.

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