Speaking to Accountants Daily, Hayes Knight founder Greg Hayes said that many practices are struggling with organic growth, and turning to mergers and acquisitions as an alternative growth strategy.
“There’s nothing wrong with the mergers and acquisitions trail, so that's quite reasonable, but I think for accountants to accept that organic growth is impossible to achieve is basically just waving a white flag,” Mr Hayes said.
“The firms who say organic growth is hard to achieve, in reality are really saying 'We don't have a strategy for organic growth' or 'We don’t have a basis to achieve organic growth'.”
Superannuation Advisors Australia director Mike McHenry told Accountants Daily that he believes around 90 per cent of firms or more look at acquisitions.
“The firms in favour of acquisitions are in favour because they don't have a point of difference, they don't have a value proposition that appeals to the market to want to use them,” Mr McHenry said.
“Even if they did, they have no way of getting that message into the marketplace and they don't have a sales team that can go out and bang the drum to let the market know it actually exists.”
Mr Hayes said that firms should refocus on organic growth techniques before the M&A market inevitably dries up.
“The M&A piece is fine, but sooner or later that's going to stop, sooner or later that's going to come to an end or it's going to slow down dramatically, because there are only so many M&A transactions there to be done,” Mr Hayes said.
“If that's not the case, then ultimately we'll end up with one firm who controls all the accounting market in Australia, which is clearly nonsense.”
However Mr McHenry said that technology-focused Millennials setting up their own practices will postpone or prevent this from happening.
“These young accountants are working for older firms, and if things aren’t shipshape technology-wise they reckon they can do a better job and they abandon ship and do their own thing,” Mr McHenry told Accountants Daily.
“So I think that’s what’s going to spawn and maintain the smaller breed of accounting firms, and the really big ones will just keep getting better at improving their own internal technologies to identify opportunities, and I think they'll keep consuming the smaller 20-staff type practices.”