Growing post-merger means identifying skills' gaps and retaining and hiring the right staff, but a lack of planning at this stage hampers growth and can put acquisitions and mergers at risk for accountancy firms, says Paul Lindsell, MD of ThoughtSpark
With acquisitions delivering the majority of growth at mid-market accounting firms over the last 12 months, it is evident that many UK accountancy firms are eyeing up their next target for acquisition.
But it is mainly at Big Four level that acquisitions are creating opportunities, particularly in consulting. PwC's acquisition of Booze & Co highlights how strategic M&A activity is driving growth while EY recently acquired UK digital design consultancy, Silicon, and governance and risk compliance firm, Integrc; and KPMG acquired customer experience consultancy, Nunwood.
Beyond the Big Four, recently rebranded RSM (formerly Baker Tilly) expanded its consulting offer with the acquisition of Outperform UK, while numerous smaller accountancy firms have announced mergers, with an eye to protecting their long-term sustainability as the demographic of managing partners changes and many face retirement.
However, while acquiring complementary firms is a popular growth strategy, acquirers must be aware of the skills shortages within their new purchases to ensure client relationships are smoothly transitioned, that newly acquired businesses are fully integrated as quickly as possible and that maximum value is leveraged from the acquisition investment.
Research by ThoughtSpark and MindMetre investigated the relative strength of core skills in businesses being acquired or funded in the UK. It found that while financial skills and sales tend to be strong in acquired businesses, marketing and IT skills are lacking. This is particularly significant as marketing is a specific skill that has been a weakness in certain accountancy firms.
No matter what industry the firm is in, buoyant business growth requires a set of key business skills (such as product development, IT management, financial management, sales and marketing/PR). Weaknesses in any of the core areas will undermine potential growth, affecting both the acquiring and the acquired firm.
With 100% being the optimum level of competency, new product development (71%) and sales (69%) were considered by private equity (PE) firms as areas of strength; while financial and business management, human resources (HR) and service distribution skills attracted moderate scores above the critical 50% watershed. The worst skillsets described as sub-par were found in IT management (45%) and marketing (44%).
When an accountancy firm acquires a business, it needs strong marketing and IT skills to not only integrate those businesses into the existing firm, but also to continue growth operations.
Addressing skills shortages
The accountancy profession is under threat from talent shortages with firms vying to attract the best staff, while retention continues to be a major issue. One way to bridge the skills gaps is to hire experienced staff with relevant experience in the required business areas. However, hiring staff can often be a time-consuming and difficult process. Some firms opt for third-party specialists that can deliver expertise in growth strategies and help discover and target new business opportunities.
Whether in-house or via an outsourced supplier, ensuring strong skill levels across all core departments is essential for sustainable and manageable growth – by acquisition or by organic growth.
Ultimately, weak IT and marketing skills significantly hamper the ability of a business to target the right audience
Having strong IT and marketing capabilities in place enables firms to conduct a wide range of activities, such as operating fully functional websites, with updated and relevant content, establishing cost-efficient new business sales processes, growing inbound lead generation, integrating tech systems and effective financial communication channels.
Ultimately, weak IT and marketing skills significantly hamper the ability of a business to target the right audience with the most effective messages and generate sales growth, as well as identify suitable M&A opportunities. Firms looking to expand must address these typical skills gaps immediately following each new acquisition.
Access the full research note here