The merger between one of the UK’s Big Four accounting firms and one of the leading independent firms of property advisers has set the hares running in both professions – and is even causing a stir in the legal profession.
Deloitte and Drivers Jonas – who were advised on tax and financial aspects of this deal by BDO - have agreed to fully merge their UK businesses (along with DJ’s French and German subsidiaries). All of the DJ equity partners will become partners in Deloitte’s UK partnership and Nick Shepherd, DJ’s managing partner, will lead the property consulting division of the firm, which will trade as Drivers Jonas Deloitte for the foreseeable future.
The Big Four accountants have long harboured ambitions to build “one stop shop” professional service firms for corporate clients; having built management consulting practices alongside their audit, tax, corporate finance and business restructuring businesses, all but Deloitte then spun off these consulting businesses. Since the dust has settled, post-Enron, all have begun rebuilding management consulting offerings – whilst being mindful of the need to avoid conflicts of interest. Deloitte’s is now the largest such business in the Big Four, all of which already offer some property advisory services. The addition of Drivers Jonas – with fee income of nearly £100m - is a bold move into head on competition with the major property consultancies (which have traditionally been built on the chartered surveying profession).
At present, this is essentially a UK move, but it is inconceivable that Deloitte UK would have taken the step without consulting its international colleagues.
Some commentators and competitors see the step as an inevitable – and brilliant, market-changing – move, given the consulting ambitions of the Big Four. It should allow DJ’s property specialists access to the boards of Deloitte’s clients and assist in a joined up approach to projects like property work-outs. Others predict that this merger will result in client conflicts and a clash of cultures.
From BDO’s perspective, whilst we respect both Drivers Jonas and Deloitte as individual firms – and expect the combined firm to become a powerful new force in its chosen areas – we believe the merger will present a number of opportunities for firms like BDO, for example in relation to Deloitte’s existing surveying clients (who may feel it inappropriate to be advised now by a competitor) and those property companies where DJ are currently independent valuers and Deloitte are the auditors.
In terms of this merger’s impact on other adjoining professions, some have noted that previous attempts by the UK Big Four to build law firms were unsuccessful, at least partly due to client conflicts and culture clashes. However, the world has changed in the decade since the Big Four were trying to build law firms. In particular, the Legal Services Act will result in a number of changes to the way that UK legal services can be delivered. From 2011, it is inevitable that lawyers will face competition from new market entrants, who may include multi-disciplinary practices (e.g with accountants, surveyors and others). Multi-disciplinary practices are certainly coming ever closer to being a reality; but again, this presents opportunities for a firm such as BDO, which remains highly focused on its core market, working with a number of respected firms in the other professions, rather than aligning with just one such firm.
Within the property profession, there are clear indications that further consolidation will occur; some of this will result in two firms of surveyors combining, but it seems certain that more multi-disciplinary mergers will be seen. The recent leak in the press regarding the prospective takeover of NB Real Estate by Capita Group PLC – on which BDO have also been advising – is an indication that broader-based property advisory businesses are being built.