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Gravita

Gravita takes on consolidators and targets SMEs

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Jeffreys Henry, Arram Berlyn Gardner (ABG) and Propel have combined to become Gravita, a new consolidator that has big plans to climb the accountancy league table and target SMEs with tech-enabled services. 

 

21st Nov 2022
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As private equity-backed consolidators begin to hoover up the accountancy sector, and press releases brag about ‘war chests’ of money, a new challenger firm hit the market last week in the form of Gravita. While the newly formed firm has ambitions of scaling the league tables, CEO Caroline Plumb isn’t interested in getting big by buying everything that moves. 

“That to me is not a strategy,” Plumb told AccountingWEB. “We are highly selective about who we talk to, about what sorts of firms are a good fit.”

That strategy is seen with the three like-minded firms that have come together to create Gravita - Jeffreys Henry, recent acquisition ABG and Propel - which all share the same DNA as tech-first practices offering complimentary services for the SME market. 

Plumb admitted that with nine or 10 equity-backed firms in the profession, “there is going to be a lot of movement in the industry” but she also sees an opportunity to build something “really differentiated and distinctive”. 

Targeting the ‘missing middle’

And it is the small and medium-sized businesses, in particular, where Plumb sees real potential for Gravita to grow. “My passion is small and medium-sized businesses, but they have been treated very poorly because people see SMEs as a segment - but they're not."

“One end you've micro businesses, that might be just one person, and on the other end of that segment, you might have an AIM-listed business that might have 250 employees or have multiple countries operations,” said the former Fluidly CEO.  

While the Big Four and many of its challenger competitors are focused on the enterprise sector, Gravita will target small and medium businesses. “Our passion will be delivering to that ‘missing middle' segment of brilliant businesses that actually deliver most of the wealth creation, jobs and growth in the country. That’s the segment we will be focused on.”

Services

The launch of Gravita comes as the Big Four has recently reduced the services they offer to small and medium businesses; an example of this is Propel, which Gravita acquired from Deloitte in September. 

So while Propel clients under Deloitte had cloud-based bookkeeping services, under the Gravita banner they now have access to full-service finance, compliance and specialist advisory offerings.

Audit is one specialism that Gravita boasts, with Jeffreys Henry’s audit team having picked up specialist team of the year at the 2021 Accounting Excellence Awards -- a service line it sees as a point of difference with its small practice competitors.

The highly selective consolidator

For the past five years, the accountancy profession has seen a rush of mergers and acquisitions.

Baldwins, backed by Cogital, led the charge in 2017 by sweeping up well-known firms like Cassons, Campbell Dallas and Wilkins Kennedy. But Baldwins seemingly started its acquisition spree by picking up smaller firms before going larger with regional firms and increasing its geographical spread. The firm later was rebranded as Azets. 

Elsewhere, the Xeinadin Group boasted an ‘overnight merger’ of 120 firms back in 2019 and continues to consolidate its place in the upper-mid tier of firms.

Backed by Tenzing, Gravita isn’t approaching consolidation with the strategy of acquiring different-sized firms with different client bases. Instead, it wants to differentiate its approach from other consolidators by being more selective. 

As Plumb puts it: “At Gravita, we take a highly collaborative view on consolidation in the market and have a carefully considered approach to finding the right firms who share our future vision.” 

The firm’s strategy is to focus on high-quality firms with a high-calibre client base around London and the South of England. 

Ambitions

The challenger firm now has its eyes set on rocketing up the accountancy league table and being a top 15 player, but Plumb is also aware of the challenges the next decade will bring as the sector shrinks.

With a name inspired by space exploration and new frontiers, it’s completely on-brand then for Gravita to be thinking much longer-term about being a defining player in the SME space. 

“There's so much consolidation happening today and that's not just in the UK market. Look what's happening in the US and the Netherlands - this is an industry-wide phenomenon. 

“You’ve got 42,000 firms in the accounting space today, and I think if you fast forward five years, 10 years, 20 years, you're going to find there are not as many firms - certainly not at that volume - and there may only be 10 to 20 firms of note and maybe fewer focusing on the SME space. 

“And we are determined that Gravita will be one of those firms that helps to define what great service looks like to SMEs.”

Caroline Plumb will be appearing at AccountingWEB Live Expo. She will be discussing the economic fallout for small businesses post-Autumn Statement on a panel with Dan Neidle, Enterprise Nation's Emma Jones and James Hurley from The Times. 

Replies (1)

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Mark Lee headshot 2023
By Mark Lee
01st Dec 2022 16:24

Hmmm.
“You’ve got 42,000 firms in the accounting space today, and I think if you fast forward five years, 10 years, 20 years, you're going to find there are not as many firms - certainly not at that volume - and there may only be 10 to 20 firms of note and maybe fewer focusing on the SME space."

I have a great deal of respect and admiration for Caroline Plumb but I cannot let this statement stand without challenging three points:

1 - Of the 42,000 accountancy firms in the UK (or whatever number of firms there really are), the VAST majority are run by one or two people with fewer than 5 staff. How many of these will be interested in joining a consolidator and would be of interest to a consolidator? Even if it was as many as 5,000 (which it won't be), that would still leave the vast bulk of the profession unaffected. So yes, fewer firms, but not significantly so.

2 - I wouldn't be making any predictions about the number of firms in 10, let alone 20 years. If I was tempted though I'd assume there will be more smaller and niche practices, rather than fewer overall.

3 - "SME" = Small and Medium Sized Enterprises. Over 98% of all UK businesses are in the SME space. Currently only the largest firms do NOT focus on the SME space. In the future, as now, the vast majority of accounting firms will continue to focus on the SME space.

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