Given the economic bumper ride of recent times, more than a few small accounting firms might be expected to sell up shop if offered a tidy sum. Yet after two years of aggressive searching, one prospective buyer has failed to find a single taker.
Openside Chartered Accountants, a Wellington-based firm, has spent several years looking to buy one or two smaller firms – anywhere in New Zealand.
Chief executive officer Stephen Nicholas told NBR that the company has not received any viable expressions of interest, despite contacting several business brokers and placing repeat advertisements with trade media and the Dominion Post.
He blames the profession’s apparent chronic lack of succession-planning, a problem across many business sectors but one of particular relevance in accounting.
“Accountants are very good at dishing out advice on how to grow and exit a business, but are not so good at taking it,” Mr Nicholas said.
“Many seem to be operating almost as sole traders rather than thinking about how to build a business for sale."
Although exact numbers are hard to quantify, partners in small accounting firms often tend to be aged over 60, and usually work until their physical, mental or financial health deteriorates rather than sell up in advance.
This tendency would appear to be problematic, and not just for the likes of Mr Nicholas, because taking over an accountancy practise in a fire sale scenario is hardly ideal for buyer, seller or transferred clients.
A lack of consolidation options for smaller firms may also prevent improvements in the quality of financial advice available to ‘average Joe’ clients.
This country’s accounting industry can be divided roughly into three tiers: the so-called “big four” corporate firms, the dozen or so firms of the size of BDO or Grant Thornton, and at least several hundred small firms with one or two partners.
Larger firms have a competitive advantage when giving financial advice, as they are able to offer greater specialisation within the firm.
According to Mr Nicholas, Deloitte, KPMG, Ernst & Young and PricewaterhouseCoopers have “really cornered that market,” which is great for clients willing and able to pay top dollar.
He would like to see more consolidation among smaller firms, in order to increase the access of smaller businesses and investors to high quality and specialised financial advice.
“If you’re only dealing with a very small number of clients, you’ll give a very biased point of view depending on your client base. If you’re working with a wide range of people, you’ll learn a lot more as an accountant and you’ll be better able to give advice.”
Mr Nicholas believes that changing the mindsets of current practitioners is “absolutely crucial” if such consolidation is to occur, but whether that happens in time to assist Openside CA in its current acquisition drive remains to be seen.
Mon, 10 May 2010