I was saddened but unsurprised by the news that Moore Stephens and Chantrey Vellacott are to merge with effect from 1 May 2015.
I originally trained at a predecessor firm of Chantry Vellacott and the current managing partner, Mike Tovey, was my manager when I qualified as a chartered accountant in 1982.
The name of the firm I was with, Wood & Co, disappeared long ago so it’s not the disappearance of the Chantrey Vellacott name that saddens me.
The press release announcing the merger contains the standard factual outcomes and the ubiquitous aspirations that accompany all such ‘mergeovers’:
- The firms will merge and continue to use the larger firm’s name, brand and international association.
- This will reinforce their position as one of the UK’s biggest mid-tier firms.
- “The merger provides a platform for continued, sustainable growth. There are real synergies, not just in terms of the services and sectors but a coming together of similar philosophies and values to form a strong combined firm.”
- “This provides an important strategic development for both firms. The combined firm will provide our clients with a broader range of expertise, along with an increased depth of sector knowledge and experience.”
- “Clients will also benefit from access to much wider UK and global capabilities through the [larger firm’s] UK and international network.”
Much the same thing is said every time two mid-tier accountancy (“rival”) firms merge. The drivers for these mergers are typically the ongoing struggle for multi-disciplinary mid-tier firms to generate sufficient profits and to STAND OUT from all of their competitors.
The simple fact is that the downwards pressure on fees and the overheads involved in running mid-sized firms are a constant battle. And this battle has challengers on both sides.
First there are the larger firms which are perceived to have more credibility and clout. They typically have more than one or two suitably experienced experts in any discipline you might name. Everyone recognises the name of the firm and many top graduates aspire to work for one of them in the first instance. The larger firms invest time and money in networking and marketing their services and key people to target clients – many of which are currently serviced by mid-tier firms.
Secondly there are the smaller firms which are perceived to offer similar quality services, more regular direct access to partners, greater flexibility and, typically, lower fee levels.
The struggle for the mid-tier firms that want to survive and thrive is threefold. They need to:
- Convince larger clients that they do not need the services of a larger firm. This often necessitates having more than one or two credible client friendly in-house experts for each of all necessary specialisms. And those key clients need to know who they are. When a large client moves on to a larger firm, examine the real reasons and avoid the internal blame game. What can be done to avoid a recurrence? Maybe a merger is the only (short-term) solution to sustain the practice. I wonder though whether this is ever enough to retain those larger clients who are tempted to move to a larger firm?
- Improve their market focus so as to secure increasing numbers of new and profitable clients. Without this clarity fewer and fewer businesses will see any good reason to move their affairs to a larger version of the smaller firm they were with previously. I would add that this approach requires a move away from the traditional game of rewarding partners and staff for picking up new fees, regardless of size and unaware of the, typically, disproportionate cost of acquisition of clients where the fees are relatively low.
- Clarify a clear, credible and consistent focus on specific market niches rather than trying to be all things to all people. That old-school approach rarely has any credibility any more, in any size firm. If pursued it will invariably result in the firm sliding into a merger that benefits only the most senior partners. Few growing businesses will be attracted to yet another ‘fits all sizes’ accountancy firm that doesn’t evidence the necessary expertise in relevant specialisms.
I’m generalising of course. But the writing has been on the wall for years. Before I joined BDO in 1997 I was a partner at, what is now, Crowe Clark Whitehill (CCW). Even back then this mid-tier firm was recognising the value of adopting a clear focus on 3 distinct specialisms. I don’t know for sure but I would expect that it is this approach that has helped sustain CCW over the last 18 years.
The firm has long evidenced a consistent focus and expertise in advising Professional Practices, Not For Profits and Pension Funds. I’m sure that this approach is also a major contributor to their ability to recruit good partners and teams and to consolidate their position in the top 20. I am sad, but unsurprised when yet another mid-tier firm of accountants is merged out of existence.
For many years I advised on mergers of professional service firms. I can still recall one of my favourite mantras that “the merger of two weak and unprofitable firms rarely creates a strong profitable firm”.
What saddens me is that the merger of Moore Stephens and Chantrey Vellacott is a reminder of the large number of accountancy firms that are perceived as being ‘just another’ mid-size firm. Just another large firm of accountants who are all perceived to do much the same things, in much the same way for similar types of clients.
Of course they struggle to win as many new profitable clients as they would like to do. And of course they lose some of their better partners and staff to more profitable firms. It’s hard for larger firms to get the buy-in and commitment from enough partners to change engrained habits. This requires strong leadership, informed external stimuli and a willingness to invest sufficient time and money to make the necessary changes. The fewer partners who need to be convinced this will secure the longevity of the firm, the easier it is to take the necessary steps.
All sizes of firms of accountants would benefit from adopting simple names and brands that are distinct and memorable. They also need to clarify their business focus and evidence how specific groups of clients benefit most from engaging their services. This is not easy.
To most people, most accountants are much the same. And it’s rarely credible or sufficient to claim that “it’s our people that make us different”.
That claim only has credibility if all those people have grown up in the firm and not worked elsewhere. If there are many recent recruits everyone needs to be able to confidently and honestly talk about the differences they have noted since moving to their new firm. And for those new recruits to be able to assert that ‘Yes that this firm’s style and approach really is different. Everyone’s focus is genuinely on helping clients and there is less of the internal politics and internally focused targets that most other firm obsess about. Clients benefit because we know that without our clients we’d have no business.” And so on.
Of course, the more firms whose people make such claims the more they all sound the same again. This is part of the reason why I am a great believer in the importance of individual partners and staff being able to STAND OUT from their competitors. Of course it helps if the firm has a strong brand and clear business message. But ‘Business branding and messaging’ is only one of the 7 fundamental principles that you can use to STAND OUT from the pack.
I wish everyone in the newly merged firm, Moore Stephens, all the best. And I hope that the merger creates a sustainable, profitable and respected firm that is a professional and fun place to work.
In the mean time I’ll await news of the next mergover in the accountancy sector. I doubt I’ll have to wait long.