July’s Accountancy magazine reports on a round table discussion between 6 lead partners of mid tier firms. Their discussion does not rule out further mergers in the sector. 2007 has been a bumper year for mergers with the merger of Grant Thornton and RSMI Robson Rhodes still fresh in the memory. Meanwhile, Deloitte is in the process of merging its UK practice with its Swiss Practice, whilst KPMG is merging its UK practice with its German practice. In the law sector American firms are tending to integrate further with UK practices e.g. the creation of K&L Gates by joining Gates Kirkpatrick & Lockhart Nicholson Graham with Preston Gates & Ellis.
This has several implications for the L&D department in a professional firm:
- Reduced discretionary spend where firms are trying to make themselves look as lean as possible before a merger
- Uncertainty over whether you will be one of the overheads that will get cut out of the new firm
- Urgent projects such as change management, team building, systems training, aligning competencies and curricula
Whilst many of these projects present new opportunities and build your CV, life would be so much easier if this merging was not happening. So what’s driving these mergers?
Classically mergers happen when one of the firms is underperforming. The other firm believes that it is run better and can extract more value from the assets (e.g. client list, people, systems) of the underperforming firm, increase its scale and reduce competitive pressures in the marketplace.
I find the mergers between UK and European practices in the Big 4 particularly interesting. Historically the UK firms have had far higher profit per partner than their European counterparts. Hence the UK partners are thinking that there’s client lists to be harvested better in Europe, whilst the European partners are seeing this as a chance to get more parity in their salaries.
Although fees per partner are 5% up from last year over the UK’s top 60 accountancy firms, the European mergers imply that the UK firms may be struggling to think where further organic growth is coming from…and as Maister points out, growth is imperative to sustain the professional firm’s pyramid and provide enough opportunities for staff seeking promotion. Is a decade of growth coming to an end?
