Baker Tilly UK has announced it intends to merge with independent firm Horwath Clark Whitehill (HCW) (Yorkshire) to create what it claims will be the largest accountancy group outside the Big Four in West Yorkshire, northern England.
The merger is expected to take place on 1 April and the new entity will operate as Baker Tilly. The combined presence in West Yorkshire will consist of 24 partners and more than 200 staff. It will be based in Leeds, with additional offices in Bradford and Keighley. HCW (Yorkshire) brings 13 partners and more than 100 staff to the new entity.
Nationally, Baker Tilly is the seventh-largest accountancy group in the UK, with fee income of £200.4 million ($398.5 million) for the year ended March 2007. It is less than two-thirds the size of the UK’s sixth-largest firm, BDO Stoy Hayward, which had fee income of £317.4 million for the year ended June 2007.
Wishful thinking Baker Tilly UK national managing partner Laurence Longe dismissed claims made by BDO Stoy Hayward managing partner Jeremy Newman last December (see issue 419) that Grant Thornton UK and BDO have broken away from the rest of the UK mid-tier firms and should no longer be grouped with them.
“The simple fact is there is a Big Four, it is plainly a market segment that can be seen. There is a noticeable difference between the Big Four in terms of scale and the next tier of firms [which] includes Grant Thornton and BDO and Baker Tilly. To suggest otherwise is wishful thinking,” Longe said.
“Ultimately, if you look at it from a simple size comparison, to have a firm that is half as big again [and they] are suggesting that they are somehow or other different – if we are not in the middle tier, what tier are we? It is all marketing hype. I can understand that firms want to present themselves in the way that they do, but it shouldn’t be done in a way that can be misinterpreted.”
HCW (Yorkshire) is a separate partnership to national UK firm Horwath Clark Whitehill. A spokesperson from the national firm said the merger of the Yorkshire practice will have no operational impact on Horwath Clark Whitehill and there was no formal direct referral relationship between the two. “Last November, at our request, the Yorkshire office committed to changing its name to avoid further marketing and brand conflict. This change was scheduled to take place from 1 April 2008,” the spokesperson said. However, the Yorkshire firm’s revenue was included in Horwath Clark Whitehill’s fee income of £55.3 million reported in the most recent IAB UK survey (see issue 419). “Accordingly, we would report a small reduction in growth for 2008/09,” the spokesperson said.
Longe said that HCW (Yorkshire) “considered that their future would be better placed with Baker Tilly”. He said that what Baker Tilly brought to the partnership was a significant business in Leeds.
Longe said the merger was also a good opportunity for Baker Tilly to add critical mass in an important marketplace. “Leeds is a major commercial location – all of the major firms are centred in Leeds,” he said, listing London, Manchester, Birmingham, Liverpool and Bristol as among the other important UK locations.
“The principal [opportunity] for us here was we’ve got a high quality team, a team of people we know in the markets in which we were already operating. Every merger you look at is strengthening your business either regionally, nationally or even internationally and here we had an opportunity which strengthened us regionally. You make a strong, successful business by building each of the building blocks that makes it up. The firm is made up nationally by having strong regional offices and the firm is made up internationally by having strong national businesses.”
Consistent growth The merger with HCW is Baker Tilly UK’s 20th merger in the 20 years the firm has been established. Longe said Baker Tilly will consider other merger opportunities in the UK as they present themselves. “We’re covered in every major location in the United Kingdom already, but that doesn’t mean that there aren’t potential opportunities out there,” he said. “Usually a factor in us making a decision to go to that market would be that we’ve already got a presence there or we’re extending where we are operating in a region but maybe from a location that’s further away and that we want to build a base more locally.”