That’s according to this article in FT anyway:
Accountancy firms courting private equity were falling prey to “Fomo”, MHA chief executive Rakesh Shaunak told the Financial Times. “Everybody wants to be part of that feeding frenzy . . . I think IPO is the right option.”
Shaunak said public accounting firms had more strategic freedom than those owned by private equity, where options might be constrained by a high debt load and a focus on boosting profit so investors can exit after a few years.
MHA “didn’t want to be totally motivated by [earnings before interest, taxes, depreciation and amortisation]”, he said. “With the IPO, with the range of investors you have, you don’t have that singular pressure.”
With yearly revenue around £500 million, top 15 UK firm MHA hit the London Stock Exchange in April, debuting at a market cap of approximately £271 million ($371 million USD).
FT’s article begins with a quick history lesson, that of RSM Tenon. A member of RSM Global, RSM Tenon was the result of merging Tenon Group with RSM Bentley Jennison and was listed on the FTSE Small Cap Index across the pond in 2009. At the time it was practically unheard of for an accounting firm to not be owned by partners and, as FT says, its failure in 2013 “marked the failure of the profession’s decade-long experiment with the public markets.”
With all the recent talks about investors buying up accounting firms to create AI-powered rollup firms, RSM Tenon’s short history may be doomed to repeat when some of those roll-ups inevitably fail. From RSM Tenon’s Wikipedia entry:
It was formed as a “consolidator”, inviting existing small local accountancy partnerships to join it and become part of a national company.
It acquired five firms in April 2001 for £60 million, making it the 15th largest and the first PLC in the United Kingdom league table of accountancy firms. In practice, the company found it difficult to integrate these businesses, and its share price dropped to 6.25p in 2003, following the dot-com bubble. [Ed. note: We’ve been saying for a while now that the AI hype is feeling an awful lot like the dot com bubble to those of us old enough to remember it, remember we said that five years from now when the frenzy dies down.]
When Tenon was launched, financial audit could not be carried out by a PLC, so the auditors from the predecessor firms formed an associated partnership known as Blueprint Audit. The rules requiring strict separation were relaxed in March 2005.Tenon’s public image was characterised by Accountancy Age magazine in April 2010, as “quirky but recognisable entrepreneurial based branding”.
In 2017, four years after the firm fell into insolvency, PwC and a senior partner were fined millions by the Financial Reporting Council for “extensive” misconduct related to FY 2011 audit of RSM Tenon Group plc. The year before that former RSM Tenon CEO Andy Raynor was also fined and hand-slapped for conduct that “fell significantly short of the standards reasonably to be expected of a member of the ICAEW in relation to the approval of the financial statements of RSM Tenon and failed to act in accordance with the fundamental principle of professional competence and due care contained in the Code.”
Baker Tilly bought what was left of the firm in 2013.
But it’s a new decade and we’ve learned so much from the past, right? Surely we will not make the same mistakes by jumping head first into big money deals and tech-powered practices taped together by finance bros just because there’s so much cash being thrown at firms right now. Nope, not this profession.
