10-20-2007, 05:48 PM
"It is up to firms like us to capitalise on our strengths now," says Michael Cleary, Grant Thornton's chief executive, of yesterday's Markets Participants Group report and what it could mean for his business.
It is almost six months to the day since Grant Thornton and Robson Rhodes announced the merging of their partnerships, pushing the combined firm to number five in the UK audit rankings by size and sparking speculation it would bid to become the Big Fifth.
To say it was snapping at the heels of the Big Four would be an overstatement last year the combined revenues of Grant Thornton and Robson Rhodes were Pounds 361m, which is less than a third of the total fees generated by the smallest of the Big Four, Ernst & Young, and less than a fifth of the biggest, PwC.
But if a Big Fifth or Sixth were to develop, it is most likely to come from the mid-tier, meaning Grant Thornton and BDO Stoy Hayward, its near-rival, are the most likely candidates.
Grant Thornton and Robson Rhodes completed their merger at the beginning of July and its leaders profess themselves delighted with the progress.
"Both firms had similar cultures and we're getting positive feedback from staff. There are a few issues around IT and property, but that's really it," says David Maxwell, former managing partner at Robson Rhodes and now a partner on Grant Thornton's management board.
"We were expecting more problems than we've encountered, " said Mr Cleary.
"You always know when people get integrated because they gang up against management and we're seeing that, in that they're saying 'now we're one, can we do this or can we have money for that?'"
Outside of the core audit business, Grant Thornton has a number of thriving specialist teams.
Its UK infrastructure advisory unit is currently the leading adviser among accountancy firms to public-private partnership deals in Europe.
In worldwide terms, Grant Thornton International overtook Big Four rivals PwC and KPMG in the first quarter this year to advise on the highest number of publicprivate deals.
In the UK it audits more Aim-listed companies than any other firm and is the leading nominated adviser this year in terms of amounts raised through initial public offerings. So with business seemingly going so well, why does it want to move up into auditing the big fish?
"We have these leading businesses but there's no doubt about it, if you work in an organisation which has that public recognition (of doing top company audits), that's an important part of your brand," says Mr Maxwell.
Mr Cleary adds "We already act for one in four of the FTSE 100 in non-audit work but who knows that? Audit is a credibility stamp on the firm and that also opens doors for other parts of your practice."
Average fees for statutory FTSE 100 audit work came to almost Pounds 4m per company last year, ranging from the most complex at Pounds 28m to 29 at less than Pounds 1m each. Including audit-related services for the same clients, average fees rose to Pounds 7m and ranged from Pounds 44m to Pounds 400,000.
All this went to the Big Four firms.
For regulators looking down, this underlines the risk of concentration among too few. For those firms looking up and armed with the potential changes spelled out in the MPG report, it signals opportunity.
It is almost six months to the day since Grant Thornton and Robson Rhodes announced the merging of their partnerships, pushing the combined firm to number five in the UK audit rankings by size and sparking speculation it would bid to become the Big Fifth.
To say it was snapping at the heels of the Big Four would be an overstatement last year the combined revenues of Grant Thornton and Robson Rhodes were Pounds 361m, which is less than a third of the total fees generated by the smallest of the Big Four, Ernst & Young, and less than a fifth of the biggest, PwC.
But if a Big Fifth or Sixth were to develop, it is most likely to come from the mid-tier, meaning Grant Thornton and BDO Stoy Hayward, its near-rival, are the most likely candidates.
Grant Thornton and Robson Rhodes completed their merger at the beginning of July and its leaders profess themselves delighted with the progress.
"Both firms had similar cultures and we're getting positive feedback from staff. There are a few issues around IT and property, but that's really it," says David Maxwell, former managing partner at Robson Rhodes and now a partner on Grant Thornton's management board.
"We were expecting more problems than we've encountered, " said Mr Cleary.
"You always know when people get integrated because they gang up against management and we're seeing that, in that they're saying 'now we're one, can we do this or can we have money for that?'"
Outside of the core audit business, Grant Thornton has a number of thriving specialist teams.
Its UK infrastructure advisory unit is currently the leading adviser among accountancy firms to public-private partnership deals in Europe.
In worldwide terms, Grant Thornton International overtook Big Four rivals PwC and KPMG in the first quarter this year to advise on the highest number of publicprivate deals.
In the UK it audits more Aim-listed companies than any other firm and is the leading nominated adviser this year in terms of amounts raised through initial public offerings. So with business seemingly going so well, why does it want to move up into auditing the big fish?
"We have these leading businesses but there's no doubt about it, if you work in an organisation which has that public recognition (of doing top company audits), that's an important part of your brand," says Mr Maxwell.
Mr Cleary adds "We already act for one in four of the FTSE 100 in non-audit work but who knows that? Audit is a credibility stamp on the firm and that also opens doors for other parts of your practice."
Average fees for statutory FTSE 100 audit work came to almost Pounds 4m per company last year, ranging from the most complex at Pounds 28m to 29 at less than Pounds 1m each. Including audit-related services for the same clients, average fees rose to Pounds 7m and ranged from Pounds 44m to Pounds 400,000.
All this went to the Big Four firms.
For regulators looking down, this underlines the risk of concentration among too few. For those firms looking up and armed with the potential changes spelled out in the MPG report, it signals opportunity.