I predict that 2019 will see a few high-profile mergers and/or acquisitions of Accounting firms outside the top 4 but inside the top 20. The recently publicised merger (acquisition) of BDO and Moore Stephens, likely to happen in February 2019, is the first but certainly not the last. BDO’s strategy is clearly to try and break into the Big 4 domain and try and capitalise on their recent woes regarding audit conflict and a desire to obtain more FTSE clients.
It is also lead by a desire to leap ahead of Grant Thornton in the rankings to become no 5 in the UK. BDO have publicly stated this isn’t necessarily the last merger/acquisition they will make in 2019. I have no doubt that Grant Thornton will not take this lying down and am sure within their boardroom, moves will be afoot to also merge and acquire as they will not want to be left behind. Further, they will be keen to counter negative publicity on recent poor PR on such things as Patisserie Valerie where their audit methods have been questioned.
Throughout the last 25 years, there have been periods of merger activity in the top 25 firms followed by periods of inactivity. We believe 2019 will be a year of change in the accounting profession, both in terms of merger activity and an attempt by the national firms to re-establish their credentials as guardians of the PLC world – a position which has been sorely tested over recent months.
With the big firms concentrating on consolidating their audit practices increasing focus will fall on the uneasy relationship with their consulting arms. As a result, we predict that at least one of the consulting arms of the big 6 will be broken away. This is likely to include restructuring and corporate finance.
We believe this will be the start of a new era for nimble, independent advisers with the skills, breadth and reach.
