Succession challenges set to
change Australian industry

In ten years the Australian accounting profession will
look nothing like it does today, according to Greg Hayes, senior
partner of Morison International member firm Hayes Knight. “We are
certainly seeing a structural change occur in the accounting
profession in Australia,” Hayes said, speaking to IAB as
part of the Australia survey (see “IAB Country Survey: A super
year”)
. “I predict the number of accounting firms will drop by
about 20 percent over the next five years. It’s primarily driven by
succession and convergence.”

Hayes said the average age of a principal in public practice is
currently 54.“A lot, particularly at the smaller end, are looking
to opt out,” he said.

He added that medium-sized firms are looking to acquire these
smaller firms: “You’ve got the medium-sized firms, our size and
larger, who are acquirers. You’ve also got a movement in the public
company market where we have about two or three listed companies in
Australia who provide accounting services. The likelihood is that
number is going to grow to about six to ten over the next five
years and the only way those companies can carve out a position is
by acquisition.

“The most attractive firms in this country at the present time for
those companies are firms with revenues of A$2 million [$1.8
million] to A$5 million. A public company in this country probably
needs to have about A$200 million to A$250 million in fees to be
able to justify its existence in the public environment. What that
means is those firms need to acquire 50 to 100 of those firms.
There are not enough of those firms around to satisfy the market
that is going to be there, so we are going to see a very different
market-place in the next five to ten years.”

Michael Bannon, a tax consulting partner at Nexia Duesburys, said
succession planning has been affected by a change in the work
ethic. “Some [young people] don’t want to work as hard as their
partners and are concerned if they become a partner they will have
to work as hard and that doesn’t fit in well with their family
work/life balance,” he said.

Jim Smith, an MSI Ragg Weir partner and the Asia-Pacific
representative for MSI Legal & Accounting Network, said his
firm has been successful in grooming younger people to take the
responsibility of partners. “That success on our part is not
necessarily mirrored throughout the profession,” he said.

In terms of possible solutions, he suggested: “Obviously, there are
alternative models [to the traditional partnership structure]. The
consolidators are out there… this time I think their model is
more successful than it has been in the past. The consolidator
model will be an easy option for a lot of those people [looking
towards retirement]. I think that if generation Y has different
aspirations, there could be some difficulties with the professional
model – the partnership model that’s existed in the past. I’ve yet
to see a comprehensive alternative articulated in detail,
however.”

One firm that has already embarked on a different model is Moore
Stephens Queensland, which has a corporate model with a chief
executive, and executive and non-executive board members. The
firm’s managing director, Ken Pickard, spoke to IAB in
June and predicted the partnership model will cause difficulties in
the future.

He said the corporate model provides the potential for all staff to
invest in the firm.

“So right down to the lowest junior, if they feel as if they want
to invest in their future and their firm, then there’ll be an
opportunity,” he said.

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