As the dust begins to settle on the implosion of Vantis, it is perhaps opportune to look back and consider some of the lessons that might be learnt from the unseemly fall of a top 20 accountancy firm. No doubt in time, we may learn more of what really caused its demise - Stanford was only part of the problem - but as someone who has lived through this twice (and Numerica's end was dignified by comparison) I thought I would set out some of my thoughts on why I think the model of the consolidator is flawed and why - perhaps - it was doomed to fail.
I must state at this point that these are my own personal opinions and I am sure that there will be many that might take issue - please let me know what you think.
Accountants as a whole have an almost unique business model in that they have the one asset to which virtually no other profession can lay claim - the renewable fee. As a whole accountants know that unless they totally screw things up, they can usually rely on a large proportion of their fee income to repeat every year.
This is an invaluable asset -and the price thereof is, that whilst most accountants in practice make a very good living they do not perhaps earn the same level of profits as - say - lawyers. But the knowledge that the majority of their top line is going to reoccur every year is worth the possible lower level of net income.
Now, if you then take that average practice, convert the partners' profits to salary - add National Insurance on top and a level of administrative overheads that some obviously think are necessary for a public corporation - and then expect to make super profits on top of that, you require some pretty nifty management and a lot of special fees.
In the Numerica days, the concept was (maybe not officially) that general practice paid the bills and Corporate Finance - in the good times - and Corporate Recovery - in the bad - provided the super profits. Part of Numerica's problems was that at the beginning of the millennium the economy was flat so neither of the former parts of the business did particularly well.
I think Vantis's problems were different. The core business was, and still is, very good with many excellent clients and more importantly, excellent staff and partners to service them. Apart from any questions of mis-management that might have occurred, I think the level of administrative overhead was far too high for a business of Vantis''s size. There were just too many people in areas such as HR, Marketing, PR and IT who whilst, individually, were no doubt valued employees and went about their tasks conscientiously, they added little or no value to the business itself.
However you fix it, 2+2 will not equal 5 - and if you try to squeeze more profit than the business can possibly generate, it is going to fail.
And I return to my earlier point about Accountants having the benefit of the renewable fee. There is a further price to be paid for this and that is a special relationship that accountants develop with their clients. Sure, some clients take liberties, but on the whole most of them value the services they receive and are willing to pay a reasonable price for it. Sometimes they might take longer to pay than other businesses might consider acceptable, but on the whole they do pay - and continue to do so year after year. You cannot commoditise that relationship and you cannot treat clients as if your are selling widgets. It just won't work.
And so what of the future. Well most of the individual offices are now independent and I have no doubt that they will do well as a result. For those offices that have gone to RSM Tenon, I am sure, as the first and virtually the only consolidator left, they will learn from the errors the others made and flourish.
I certainly hope so.