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Big Four challenger firm Cogital up for sale

29th Jul 2019
Editor AccountingWEB
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Glass Tall Buildings in Financial District

Positioned as a challenger to the Big Four, Cogital hit the scene by hoovering up regional firms and now its endgame could be complete as several private equity groups are circling.  

As reported first in the Financial Times (behind a paywall), BC Partners, Permira and PAI in Europe, and Hellman & Friedman in the US are eyeing up accounting consolidator Cogital.

With final bids expected in mid-August the group, which has the 90-office strong Baldwins, Wilkins Kennedy and Blick Rothenberg in its stable, could be valued at around £1bn (including debt).

What private equity firms get for their money is still unconfirmed as all parties have declined to comment on whether this bid is for a minority or majority stake.

The Cogital group is led by former Deloitte head honcho John Connolly. When the Cogital first hit the scene in 2016, backed by the deep pockets of private equity firm HG Capital, many assumed the firm had the Big Four in its sights.

Connolly outlined Cogital’s vision last summer to AccountingWEB, with Scotland, the South of England and the North East all slated as territories ripe for expansion.

The firm continued to fulfil its geographical ambitions earlier this month after acquiring two further practices in the West Country: Truro-based Kelsall Steele Chartered Accountants and Perrins Chartered Accountants in Barnstable.

Cogital/Baldwins often takes a digital fixer-upper approach with its acquisitions, giving firms new to the group a digital makeover. This is intended to arm accountants with insight technology such as AI pioneer Fluidly to support their advisory services.

News of the buyout coincides with the group hitting revenues over £500m and a net income of £343m, which Connolly coincidentally earmarked as his revenue ambition when he spoke with AccountingWEB.

Cogital is split into three divisions, with 50% of its revenues coming from the Nordics and 50% from the UK market. Its growth is equally as impressive in employee and office size, spanning 6,500 employees across eight countries and boasting corporate clients in 60 countries.  

Since Cogital’s inception, Baldwins has led a rush of mergers and takeovers adding big names such as Campbell Dallas and Cassons to its basket, harkening back to the age of the consolidators famed by the RSM Tenon.  

Return of the consolidators?

However, Cogital’s movements reflect a mid-sized practice spending spree across the profession. Just last month, another 120 accounting firms across the UK and Ireland united under the new consolidator on the block: Xeinadin group.

While a certain level of mystery still shrouds Xeinadin, the group parrots the same Cogital tech ethos by aiming to place "technology and best practice at the heart of its client offering".

The disparity between tech-ready accountants and the digitally unprepared has driven the return of consolidators. Many practitioners are looking towards the exit door as the additional workload of Making Tax Digital and digitalisation becomes the final straw for some.

Over on AccountingWEB's Any Answers forum, readers have received offers from larger firms offering to buy their practice or clients with “very good terms”.

Casting his analytical eye on the scene, AccountingWEB regular Maslins noted: “When interest rates are low, bigger firms with spare cash decide to try to expand rather than sit on the savings. Perhaps also with things like MTD & Brexit there may be a lot of nervous small practitioners who just want out.”

Baldwins has left its acquisition footprint on the northeast but for AccountingWEB reader Glenn Martin the impact has affected smaller firms. “The fall out helps us as their smaller clients get priced out and come to us and make decent clients,” he said.

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