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Succession/merger/sale What will the exit model look like in 2021?

Succession/merger/sale What will the exit model look like in 2021?. Presentation to the MGI UK and Ireland Annual Conference 2 December 2011 Derek Smith. One Vision. One Vision. Vision, Give me your hands, Give me your hearts, I'm ready, There's only one direction,

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Succession/merger/sale What will the exit model look like in 2021?

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  1. Succession/merger/saleWhat will the exit model look like in 2021? Presentation to the MGI UK and Ireland Annual Conference 2 December 2011 Derek Smith Foulger Underwood Associates Limited

  2. One Vision Foulger Underwood Associates Limited

  3. One Vision Vision, Give me your hands, Give me your hearts, I'm ready, There's only one direction, One world and one nation, Yeah one vision Foulger Underwood Associates Limited

  4. Good Afternoon Foulger Underwood Associates Limited

  5. My theme Succession/merger/sale? What will the exit model look like in 2021? Foulger Underwood Associates Limited

  6. Agenda • Introduction • Context • My objectives • The UK market and professional service firms • The past • The present • The future • Succession/merger/sale • The past • The present • The future • The future – what will the successful firm look like? Foulger Underwood Associates Limited

  7. Introduction • Who I am • What I do • Why I am here Foulger Underwood Associates Limited

  8. Context • Change is the only constant • The trouble with the future is that it is not what it used to be. Paul Valery • The trouble with the future is that is usually arrives before we're ready for it. Foulger Underwood Associates Limited

  9. Context • Change is the only constant • The trouble with the future is that it is not what it used to be. Paul Valery • The trouble with the future is that is usually arrives before we're ready for it. Planning is the key Foulger Underwood Associates Limited

  10. Plans? What plans? Foulger Underwood Associates Limited

  11. Plans? What plans? “The nice thing about not planning is that failure comes as a total surprise and is not preceded by a period of worry or depression” Professor Malcolm McDonald Foulger Underwood Associates Limited

  12. Agenda • Introduction • Context • My objectives • The UK market and professional service firms • The past • The present • The future • Succession/merger/sale • The past • The present • The future • The future – what will the successful firm look like? Foulger Underwood Associates Limited

  13. Objectives To encourage thought and discussion among members by: • Giving some background on the market and to share some experiences as to where it is • Looking at where the market seems to be going • Perhaps questioning your current thinking and position • Giving you some issues to think about by being challenging (and perhaps provocative!) Foulger Underwood Associates Limited

  14. Some provocation? • Where to start? Foulger Underwood Associates Limited

  15. The audience? MGI International • MGI is one of the largest alliances of independent auditing, accounting and consulting firms in the world. UK and Northern Ireland • A worldwide association of independent auditing, accounting and consulting firms Foulger Underwood Associates Limited

  16. The audience? MGI International • MGI is one of the largest alliances of independent auditing, accounting and consulting firms in the world. UK and Northern Ireland • A worldwide association of independent auditing, accounting and consulting firms Foulger Underwood Associates Limited

  17. The audience? MGI International • MGI is one of the largest alliances of independent auditing, accounting and consulting firms in the world. UK and Northern Ireland • A worldwide association of independent auditing, accounting and consulting firms No tax? How many do audits? Will this continue? Foulger Underwood Associates Limited

  18. The audience? MGI International • MGI is one of the largest alliances of independent auditing, accounting and consulting firms in the world. UK and Northern Ireland • A worldwide association of independent auditing, accounting and consulting firms Foulger Underwood Associates Limited

  19. The audience? MGI International • MGI is one of the largest alliances of independent auditing, accounting and consulting firms in the world. UK and Northern Ireland • A worldwide association of independent auditing, accounting and consulting firms Foulger Underwood Associates Limited

  20. Association or alliance? • Association - groups of individuals who enter into an agreement to accomplish a purpose • Alliance Foulger Underwood Associates Limited

  21. Association or alliance? • Association - groups of individuals who enter into an agreement to accomplish a purpose • Alliance – an friendship between two or more parties, made in order to advance common goals and to secure common interests Foulger Underwood Associates Limited

  22. Agenda • Introduction • My objectives • The UK market and professional service firms • The past • The present • The future • Succession/merger/sale • The past • The present • The future • The future – what will the successful firm look like? Foulger Underwood Associates Limited

  23. 2001? Foulger Underwood Associates Limited

  24. 2001 April 2001 Tenon announced acquisition of 5 firms for £60 million 2 December 2001 Enron filed for bankruptcy Foulger Underwood Associates Limited

  25. The UK market Some key changes (over the last 20 years!) Size of service providers Nature of service providers Expectations of clients Nature of services provided Legislation Regulation Litigation Foulger Underwood Associates Limited

  26. The UK market Some key changes (over the last 20 years!) Size of service providers Foulger Underwood Associates Limited

  27. The UK market Some key changes (over the last 20 years!) Size of service providers Until 1989 – the big 8 Arthur Andersen Arthur Young & Co Coopers & Lybrand Ernst & Whinney Deloitte Haskins & Sells Peat Marwick Price Waterhouse Touche Ross Foulger Underwood Associates Limited

  28. The UK market Some key changes (over the last 20 years!) Size of service providers Since 2002 – the big 4 Ernst & Young Peat Marwick Pricewaterhouse Coopers Deloitte & Touche Foulger Underwood Associates Limited

  29. The UK market Some key changes (over the last 20 years!) Size of service providers Since 2002 – the big 4 Foulger Underwood Associates Limited

  30. The UK market Some key changes (over the last 20 years!) Size of service providers Since 2002 – the big 4 Number 4 (E & Y) is £1.383 billion; number 5 is £0.378 billion. Top 100 listed audits are big 4 clients Foulger Underwood Associates Limited

  31. The UK market Some key changes (over the last 20 years!) Size of service providers Foulger Underwood Associates Limited

  32. The UK market Some key changes (over the last 20 years!) Size of service providers Foulger Underwood Associates Limited

  33. The UK market Some key changes (over the last 20 years!) Size of service providers – WHY?? SURVIVAL IS NOT COMPULSORY IT IS A TOUGH COMPETITIVE ENVIRONMENT AUDIT DIMINISHES and COMPLIANCE COSTS LESS CLIENTS EXPECT MORE STAFF HARDER TO HIRE AND KEEP Foulger Underwood Associates Limited

  34. The UK market Some key changes (over the last 20 years!) Nature of service providers Partnerships National and international networks or entities LLPs Corporates Consolidators Foulger Underwood Associates Limited

  35. The UK market Some key changes (over the last 20 years!) Nature of service providers Partnerships National and international networks or entities LLPs Corporates Consolidators GRADUATE ENTRY LEVEL Foulger Underwood Associates Limited

  36. The consolidators • What? Acquirers of practices External shareholders/ownership Normally publicly listed Foulger Underwood Associates Limited

  37. The consolidators • Who? H & R Block Amex Tenon Numerica Vantis Foulger Underwood Associates Limited

  38. The consolidators • Why? Low value compliance and scale Distribution channel Big is better Greater scope for investment Foulger Underwood Associates Limited

  39. The consolidators • Do they work? H & R Block - yes Amex - no Tenon - maybe Numerica - no Vantis - no Foulger Underwood Associates Limited

  40. The consolidators • Do they work? WHY NOT? Foulger Underwood Associates Limited

  41. The consolidators • Do they work? WHY NOT? Pay too much Buy the fiercely independent Buy out the oldest and the best and employ the less able or the young able who gain little Benefit to client? Foulger Underwood Associates Limited

  42. The UK market Some key changes (over the last 20 years!) Expectations of clients Foulger Underwood Associates Limited

  43. The UK market Some key changes (over the last 20 years!) Expectations of clients • More for less • Certainty on price and on outcome • Broader range of knowledge • Exceptional service delivery Foulger Underwood Associates Limited

  44. The UK market Some key changes (over the last 20 years!) Expectations of clients • More for less • Certainty on price and on outcome • Broader range of knowledge • Exceptional service delivery BUT THEY SHOW LESS LOYALTY? Foulger Underwood Associates Limited

  45. The UK market Some key changes (over the last 20 years!) Nature of services provided Foulger Underwood Associates Limited

  46. The UK market Some key changes (over the last 20 years!) Nature of services provided • AUDIT requirement has changed – increased exemption, increased pressure on fees, audit and consultancy segregation • COMPLIANCE SERVICES – fee pressure, low cost unqualified providers, outsourcing • NEW SERVICES - multi-service norm, taxation, corporate finance, insolvency, consultancy, financial services, management information and accounts, HR services, IT services, actuarial services, specialist industry boutiques Foulger Underwood Associates Limited

  47. The UK market Some key changes (over the last 20 years!) Legislation Regulation Litigation Foulger Underwood Associates Limited

  48. The UK market Some key changes (over the last 20 years!) Legislation Regulation Litigation EVER INCREASING, INCREASINGLY INTERNATIONAL! INCREASINGLY “RULE” BASED STRONG AMERICAN and EUROPEAN INFLUENCES Foulger Underwood Associates Limited

  49. The UK market Some key changes (over the last 20 years!) Size of service providers Nature of service providers Expectations of clients Nature of services provided Legislation Regulation Litigation Foulger Underwood Associates Limited

  50. Agenda • Introduction • My objectives • The UK market and professional service firms • The past • The present • The future • Succession/merger/sale • The past • The present • The future • The future – what will the successful firm look like? Foulger Underwood Associates Limited

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