Mark Taylor, Co-Founder of Element45
It didn’t go brilliantly last time, but that doesn’t mean its time won’t come again.
It is now eleven years since Tenon – the last surviving listed UK accounting firm - went into administration and was subsequently acquired by Baker Tilly, bringing to an end thirteen years as a listed business.
By this time, the other firms who had listed as part of this wave, Numerica and Vantis had already disappeared.
All three of these consolidators had expanded rapidly through acquisition before running into financial difficulty. In the case of Vantis and Tenon, the timing of the global financial crisis certainly didn’t help.
Since this chastening episode, the traditional partnership model and all the management control benefits it allows – over culture, information disclosure and profit distribution - has remained front and centre in the sector. For all these benefits though, the very same profit distribution model can make it difficult for partnerships to make necessary long-term investments (in areas such as technology) and to fund sizeable acquisitions.
And now, a little over a decade later, with the sector offering attractive returns and private equity investment firmly in fashion – fuelling a new wave of acquisition strategies to drive growth – is it only a matter of time before the exit path for one or more of these investors is through the capital markets? Bigger funds are no doubt prominent in the exit planning for the PE firms already involved, but perhaps that’s not the only route. A handful of law firms – a close cousin in the professional services world – are listed, after all.
History has a cautionary tale for anyone contemplating this path though.
Without the harsh conditions of trying to weather a financial crisis whilst burdened with high debt levels, maybe things will be different next time…? Or maybe the relative short termism of public markets and the pressures that shareholders exert could once again spell trouble when dark clouds gather…
Meanwhile, shall we have a sweepstake on when it happens?