Big Four Accountancy Firms Challenged By Grant Thornton Merger With RSM

Mon, 30 Apr 2007

Accountancy firm Grant Thornton is to merge with rival firm RSM Robson Rhodes, forming a partnership designed to take on the UK's ‘Big Four accountancy giants’.

The takeover, scheduled for completion in the summer, will create the UK's fifth-biggest accountancy firm, with more than 300 partners . The new company will trade under the Grant Thornton name and boast fee incomes of around £375 million a year.

Michael Cleary, the Grant Thornton chief executive, said the firm aimed to increase that figure to more than £500m within three years.

Mr Cleary, who will run the new business, said that the deal added to the firm's already strong platform as an adviser and auditor to AIM-listed businesses and more than doubled its presence among FTSE companies .

Grant Thornton was previously the sixth-largest UK accountancy firm, but has now overtaken rival BDO Stoy Hayward. Robson Rhodes was ranked 12th, with 73 partners and 900 staff, but now the combined group will have more than 4,400 staff and 300 partners throughout 33 UK offices .

David Maxwell, managing partner for Robson Rhodes, added that the combined business would also have stronger teams in specialist areas such as project finance, forensic accounting and corporate restructuring.

"The merger creates class-leading teams in audit and tax," he said.

The new company will have a dominant position in the market for audit work on the Alternative Investment Market, the stock exchange for smaller companies, where both companies hold strong positions.

Financial regulators and City professionals have repeatedly expressed concern that just four accountancy firms - KPMG, Deloitte &Touche, PricewaterhouseCoopers and Ernst &Young - are responsible for nearly all (98 per cent) of the audit work of Britain's 350 largest companies, including almost every single FTSE 100 constituent.

Mr Cleary added, "The perception is that there are only four big firms who can do audit work . That's simply not right.

The Financial Reporting Council, the accountancy regulator, last week recommended rules to relax the laws on who may invest in accountancy firms, in order to try and help smaller companies compete.

Investors' bodies, including the Association of British Insurers, have tried to persuade companies it is not always necessary or appropriate to have one of the Big Four as their auditors.
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