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Accountants warned on consolidation bid

BOTH Australia’s peak accounting bodies are suggesting their members view offers from accounting consolidators carefully.

Two WA companies, Sterling Financial Services and the Financial Services Group, went to the market last week with prospectuses seeking funds to support their consolidation activities.

Both are planning multi-disciplinary practices that provide clients with tax advice, accounting advice and financial planning services.

There are three major consolidators operating in the eastern states – Stockford, Hearts and the Investor Group.

They had been mostly buying small practices but Stockford’s purchase of second-tier firm Mann Judd in Melbourne made the industry take notice. None of the three eastern states consolidators seem to be operating in WA.

International financial groups such as American Express had shown interest in buying Australian accounting practices to gain access to their client lists but their entry into the market seems unlikely.

The Financial Services Group has options to purchase six WA accounting firms with about $3.7 million in fees.

FSG director Des Luplau said the drive behind the consolidation was to take back some ground from financial planners.

“With the GST and the BAS, accountants have not had the time to deal with financial planning,” Mr Luplau said.

“We’re trying to mould the relationship accountants have with their clients. We want to use the accountant as a general practitioner and refer clients to our ‘specialist’ financial planners or investment advisors.”

Sterling hopes to raise $5 million and also has options to purchase six WA-based accounting practices. Those practices have about 6,500 clients and $2.5 million per year in fees.

It aims to acquire more practices with up to $2 million in fees through the capital raising and issue of further shares to vendors.

Sterling has entered into alliances with accounting practice educator Grant Thornton and business and accounting practice broker Goodwin Mitchell & O’Hehir.

Australian Society of CPAs WA director Justin Walawsky said the society would not stand in the way of market forces.

“If our members want to go down the consolidation track, it’s their business,” Mr Walawsky said.

“However, if our members are concerned about an aggressive consolidator, we will help them.”

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