The Cogital group has caused a stir in the consolidation market with its recent movements driven by Baldwins in the midlands and Scotland. But it saved its largest acquisition since launching for its London and South East expansion by acquiring Top 20 firm Wilkins Kennedy.
With over 700 employees and partners, an annual turnover in excess of £54m and 18 offices across London and the South East, Wilkins Kennedy provided enough southern reach to fulfill the Cogital Group’s geographical ambitions.
Outlining Cogital group’s acquisition plans, their executive chairman John Connolly told AccountingWEB: “Strategically we identified last year that there were three important economic territories in the UK, where we were not of any scale,” said Connolly. “Those three were Scotland, the South of England and probably West Yorkshire.”
“Not surprisingly we identified one big opportunity that could help us in a significant way across a wide area in the South East - that being Wilkins Kennedy.”
Baldwins South Region will now be rebranded as Wilkins Kennedy: a CogitalGroup Company. Wilkins Kennedy’s senior partner William Payne will head the South Region, taking the title of regional managing director.
The inclusion of Wilkins Kennedy within the Cogital Group signs off the end of the group’s first full year of its five-year plan, with Connolly just coming shy of reaching his personal ambition of £500m annualised revenue.
Next on Connolly’s radar is West Yorkshire. But as the breakdown of the group’s revenue shows, Cogital Group’s sights are international: 50% of the revenue comes from the Nordics and 50% is in the UK market.
Cogital Group started the business in both the UK and the Nordics after acquiring Visma BPO; the accounting channel the Nordic-based software company Visma (“The Sage of the Nordics,” said Connolly) created for their product over 10-15 years period by buying dozens and dozens of accounting firms in the Nordic countries and then utilising tech solutions.
The group now serves 70,000 clients and employ 6000 people operating from 170 offices, and a technology and support centres in Lithuania and Romania which the group is using as the architecture for a group-wide portal.
Cogital Group operates with three divisions: UK-London, UK-regional and the Nordics. The Wilkins Kennedy deal was made through UK-regional, which is the Baldwins business.
Connolly’s background as the former boss of Deloitte led many to assume that he’s assembling a rival to the Big Four, but his focus is clearly on the “other end of the market”.
With a lean leadership structure and a team of no more than a dozen people at the group's HQ, Connolly is no longer in the market for the large, listed FTSE 100 companies; instead, he has his sights set on the entrepreneurial companies/SMEs. These are businesses he described as being “hugely important to the economic prosperity of most countries”. A mid-tier firm like Wilkins Kennedy certainly fits that profile.
“Our focus is on that part of the market and our feeling is that if we've got scale and investment capacity, we'd be able to create more advantageous offer for businesses in that market than otherwise would be the case if it’s just small, independent firms or companies that are offering this service; whether it is a small BPO firm, a small accounting firm or a small tax firm,” said Connolly.
Since launching the group in 2016, the Cogital Group has built its UK presence first in London with the acquisition of Blick Rothenberg and in the Midlands with Baldwins. Nine months ago it made strides in Scotland with the acquisition of Campbell Dallas.
The vast majority of the partners in the businesses the Cogital Group acquires become shareholders in the company. “We'd have 80 new shareholders in our group (after the Wilkins Kennedy acquisition) because part of the consideration is always shares," said Connolly. "That means the individuals will continue to recognise the importance of the partnership-type culture in the way the business operates.”
With an acquisition of this magnitude, commentators are left questioning what a firm with big aspirations like CogitalGroup and Baldwins will do next.
Keith Underwood, a director at Foulger Underwood, wonders how quickly Baldwins can resource the Wilkins Kennedy integration and move on. “Wilkins Kennedy has a strong identity in London and the south-east. Other smaller Baldwins acquisitions have rebranded, but with such a strong identity perhaps Baldwins perceives a risk in changing the name at this point. This could suggest the integration will be made at a slightly slower pace than the smaller deals.
“It will be interesting to see how the integration of this size of practice will be handled. As 65% of accounting firms are located in the south-east perhaps further acquisitions are planned on the back of the Wilkins Kennedy office structure.”
With Connolly at the helm, Cogital Group is bringing back the age of consolidator. But looking back at the wreckage of RSM Tenon the history isn’t great, but with Kreston Reeves and PKF looking to build new networks, is this consolidation mark two?
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.