Drive To Consolidate
Accountancy firm leaders talk to Gerry Byrne about the trend for overseas firms to buy out Irish practices and discuss how this will affect the industry and its clients
Neal Morrison’s story probably explains part of the background to what has been happening to the indigenous accountancy sector over the past 18 months or so. Medium to large overseas accountancy firms, mostly British, are snapping up Irish practices in a consolidation push driven by private equity finance backers who see accountancy as the latest must-have haven for their clients’ funds.
Morrison is a corporate finance specialist and a partner in Swords firm McInerney Saunders, an 80% controlling interest in which was recently bought out by Dains, a large UK consolidator. He had previously dropped a bombshell at a practice meeting in 2019, when he declared that he wanted out in 10 years’ time. “That’s what really sowed the seeds of the question ‘how are we going to exit?’ And that’s what’s driving things at the minute,” he recalls.
“The model for this business is changing. Once, partners made their profits and when they came to retire somebody else came along and wrote them a big cheque to take them off the pitch,” Morrison explains. “But people are no longer taking the risk of borrowing to buy an accountancy firm. The model is now coming from the future corporatisation of the business.”
Neal Hughes, managing partner of Baker Tilly Ireland, acquired in March 2023 by Azets, is not surprised by recent developments. “The partnership model has limitations to growth,” says Hughes. “Many Irish accountancy firms will grow to four or five partners, maybe even six or seven. Any professional service business becomes complicated beyond that.
“We have seen the same sort of thing happen across other professions like insurance brokerages,” Hughes adds. “Private equity would see accountancy
as being a sticky business, where the clients have no choice but to have their audit done annually. The same with insurance brokers - people have to renew insurance every year. It’s not an optional extra.
“You will find that the legal profession is going to be the same. Almost all professional services are ideal for private equity, in terms of recurring income streams. They can model income with some degree of accuracy and that’s why I think we’re seeing what’s happening now.”
For every acquisition, there is a willing seller. Neal Morrison’s colleague, Owen Sheehy, managing partner of McInerney Saunders, viewed the firm at a developmental crossroads. “We had turnover of €6m and 55 staff and we were keen to grow to the next level,” says Sheehy. “That would have required significant investment, as we didn’t have full-time human relations, marketing, IT and business development people.
“The options were we either finance it ourselves or else join up with a firm like Dains, which could provide those resources. Regulation is increasing year after year and it’s becoming more challenging for independent firms to operate in our industry.
“We were part of the UK 200 group of independent accountancy and law firms. Dains was also a member and we got to know them very well before acquisition talks. We had learned a lot about their culture, which we appreciated. We had decided not to do a transaction with some other parties who approached us because we were not happy with the way they operate. It is very much a question of who you can get on with and whether or not you like them.”
Quintas in Cork, which was acquired last year by the UK firm