Many accountants and lawyers aspire to leave the big firms and set up a boutique practice but recently there have been some notable moves in the opposite direction.
When professionals set up their own boutique practice, they usually sing a common refrain: be my own boss, no more partner meetings, cut the management hassles, avoid client conflicts.
It all sounds very appealing, so why would a successful lawyer or accountant leave all of that and return to a big firm?
The latest to make this move are Corporate Tax Consulting partners Ian Crisp, formerly of Ernst & Young, and Fiona Cahill, formerly of PricewaterhouseCoopers, who will be folding their eight-person practice into Deloitte next month.
They follow Frank Cooper’s recent decision to join PwC, just a few months after he left Ernst & Young to establish Cooper Partners.
Corporate lawyer Martin Bennett has made a similar move. His boutique practice Bennett & Co will team up next week with most of the old Phillips Fox partners to form Lavan Legal, which will be the second largest law firm in Perth.
Allens Arthur Robinson partners Michael Hollingdale and Steven Cole are other prominent professionals in Perth who left big firms to set up a boutique practice, only to return to a big firm later.
At first look, it’s hard to find a common thread linking these people, which is hardly surprising when they are such a diverse group.
But there is one theme that runs through these disparate examples – the challenge of finding a market niche that is sustainable.
Mr Crisp explains his decision to return to a ‘big four’ firm as being a function of too much success.
“We opened the doors two years ago and basically the growth exceeded expectations,” he said.
“We started with about 20 clients and we’ve grown to over 200 now.
“Deloitte gives us an opportunity to keep that momentum going.
“It also adds to our ability to tap into their suite of other tax services and their international tax capabilities.”
This factor was particularly important for Corporate Tax Consulting, as it was largely competing directly with the big accounting firms.
“We distinguished our practice by not doing SME-type businesses or private clients,” said Ms Cahill.
“We tried to stay in that typically ‘big 4’ consulting practice environment.”
Construction lawyer Michael Hollingdale believes his original decision in 1995 to leave Freehill, Hollingdale & Page (now Freehills) and establish his own practice remains valid.
“I thought the market was looking for a specialist, ‘no frills’ construction firm and I was able to meet that market,” he said.
Hollingdales operated for nine years and grew to have 12 people.
“And then the market changed,” Mr Hollingdale said.
“There was quite a significant rationalisation of the construction industry where the number of players reduced dramatically and it became largely national players.
“By 2004, I could see in the pipeline major infrastructure projects that would require sophisticated, multi-disciplinary teams to service them.
“I saw a risk that we would be perceived as too parochial and not having sufficient breadth of services to satisfy the needs of the clients.”
He was approached at the time by Allens Arthur Robinson, which wanted to establish a construction practice, and the rest is history.
Mr Hollingdale said an option would have been to build up his own practice.
“I took the view that the other route was going to be more successful and faster in terms of positioning ourselves for the interesting, complex, challenging work that we now enjoy,” he said.
Corporate lawyer Steven Cole, whose career has taken him from managing partner at Parker & Parker (now Freehills) to Cole & Co and now Allens, said another issue in boutique firms is maintaining high service standards.
He said the people setting up boutique firms usually have little trouble bringing work into their firm, courtesy of their reputation.
The problem is that big transactions can keep all of the people in a small firm fully occupied, making it hard for them to offer ongoing service to all of their other clients.
“Execution can be problematic without a team behind them,” Mr Cole said.
A further challenge facing professionals who establish a boutique practice is the amount of time they have to devote to administration and management issues.
Mr Cole said big firms offer a lot of support that partners can take for granted.
“People in a large law firm are very sheltered from the management and administration of the firm,” Mr Cole said.
“If you haven’t had experience with that, it can come as quite a shock.”
Mr Crisp acknowledged that administration issues became more and more distracting as his boutique practice grew in size and he expects the move to Deloitte will make it easier to focus on tax work.
“What tends to happen is that the administration associated with running the business takes the focus away from what we do best, which is tax.
“The Deloitte merger gives us an opportunity to continue to grow the business but spend most of our time focusing on what we like and what we do best.”
Mr Hollingdale has a similar view.
“In terms of my own ability as a partner to service clients, it’s only been enhanced by being freed up from running the show,” he said.
“The other perception is that when you move to a big firm, the clients dip out on service delivery. Well that’s just a furphy, in this firm anyway.”
A common view, especially in the current buoyant market, is that money helps to explain many career moves.
With a shortage of quality staff in most professions and a surplus of work opportunities, there is a strong incentive for the big firms to throw money at potential new recruits.
However the people who have moved to a new employer prefer to talk about corporate culture as the key to their decision.
“We chose Deloitte because they were a good fit, both structurally and culturally, so we could keep doing what were doing before,” Mr Crisp said.
“That’s basically offering access to senior people and the personal touch.”
Mr Crisp is better placed than most people to judge corporate culture – he previously worked for four different accounting firms and his partner Ms Cahill previously worked at PwC, which was one of the few firms where he hadn’t worked.
“I think, well I know, that the culture in all of the firms can be very different,” he said.
“Just because an organisation is large and multinational, that doesn’t mean there is a fixed culture or environment.”
Tax accountant Frank Cooper, whose recent career moves raised eyebrows, also highlighted the importance of corporate culture.
Formerly the managing partner at Andersen, he spent three years at Ernst & Young before leaving last year to establish Cooper Partners with former colleague Michelle Saunders.
Just a few months later, he moved on again to Pricewaterhouse-Coopers.
Mr Cooper said the motivation for his latest move was two-fold.
One was a desire to be part of PwC’s renewed push to be the premier firm in Perth.
“The guys, with very strong national support, have developed a clear strategy to build their practice to become the number one firm in Perth,” Mr Cooper said.
He said this would require cultural, behavioural and strategic changes so the firm could “go to the market as one”.
“There will be less of a focus on individual partner metrics, much more of a focus on the team and the team result,” he said.
“Having a strategic role and the capacity to be part of a leadership team taking the firm to a different level was an important challenge for me and something I could really get excited about.”
The second reason for his move to PwC was a recognition that large and complex transactions are difficult to manage in a small firm.
“You can’t deliver the total package without the depth and quality of resources,” Mr Cooper said.
“For the part of the market where I deal, that was going to be increasingly difficult, particularly in the market at the moment, where it is hard to get hold of really good quality people to grow the practice.”
Despite his latest move, Mr Cooper still believes there is a place for boutique firms.
“I think there is still a very strong market out there for the boutique firm focusing on a particular area of the market and that’s why Michelle (Saunders) chose to stay (at Cooper Partners) instead of coming to PwC,” he said.
“We didn’t reach different conclusions on the same decision, rather we had different decisions to make.
“There is a large part of the market at that SME level where they really do want to deal with a boutique, where they can deal directly with the partner.”
This view was echoed by another former Andersen partner, Keith Johns, who has built a successful tax practice in West Perth.
KD Johns & Co has grown to 20 staff and Mr Johns believes a key to its success is a focus on local companies and business owners.
“You have to develop a true relationship with the owner and it’s impossible to do that in a big firm,” he said.
The legal profession has plenty of successful boutique practices, with new firms emerging on a regular basis.
The prominent boutique firms in Perth include Blakiston & Crabb and Steinepreis Paganin.
They have succeeded by having a specialist focus on a market niche – small to mid-sized public companies, mainly in resources and technology – where they compete very effectively against the big national firms.
Other notable boutique law firms include Franklyn Legal, established last year by former Freehills partner Rob Franklyn, and Cochrane Lishman, formed this year by former Mallesons Stephen Jaques partners Ian Cochrane and Michael Lighman.
Sitting between the big, national firms and the boutiques sit the mid-tier firms that offer a full range of services.
In the legal field, a prime example is Lavan Legal, which opens for business next week.
With 17 partners and 170 staff, it will be one of the biggest law firms in Perth but will highlight its independence from the national firms.
Corporate lawyer Martin Bennett has run Bennett & Co as a specialist boutique practice for many years but he decided the future lay with a bigger firm.
“We firmly believe the merger of two quality firms with complementary practice areas will give us a powerful competitive advantage,” Mr Bennett said.
Tax accountant Mark Ceglinski is another person who believes full service, middle market firms hold plenty of potential.
He left Ernst & Young in 2003 to establish Ceglinski & Co and six months later merged with Norgard Clohessy to form Pitcher Partners.
Mr Ceglinski said it was always his game plan to team up with other people, to provide an alternative to the ‘big four’ in what he calls the middle market niche.
“The plan was always to have a full service but entrepreneurial firm,” he said.
For the professionals who have returned to a boutique practice, one of the benefits is the additional career and development opportunities for their staff.
Mr Hollingdale said Allens offered structured development programs, such as Women at AAR and leadership training, that he would not have been able to offer at a boutique practice.
His colleague, Mr Cole, said another benefit of large firms was that young staff could gain diverse experience and direct exposure to industry leaders.
The big firms that have lured boutiques into the fold have usually been clear winners, especially in the current environment with a shortage of skilled staff.
Deloitte managing partner Keith Jones said the merger with Corporate Tax Consulting “adds to our capacity to continue to grow”.
“That’s the intention of this exercise, to not only bring on board the talent, the people and the revenue they currently have but to built up our capabilities so we can grow the business into the future,” Mr Jones said.
The merger continues the rapid growth of Deloitte’s tax practice, which has expanded from four to eight partners over the past three years and now has 60 staff.
Mr Jones said the firm has expanded by 25 per cent per annum over the past three years, and its staff has increased from 170 a year ago to 260.
“When you have that sort of growth, it’s a reflection of the market but it’s also a reflection that you are doing very well in that market,” he said.
Allens has also enjoyed strong growth in recent years – starting virtually from scratch in Perth in 1997, it now has 120 staff.
Its mergers with Cole & Co in 1999 and Hollingdales in 2004 have certainly helped its growth path.
At PwC, Mr Cooper said the firm’s goal to be number one in Perth was based around “quality, client base, reputation, the way you look after people, not simply size”.
He said PwC already had a solid base, with good people and a good reputation and was seeking to go to the next level.
“It’s about setting our own internal benchmarks and seeking to exceed those rather than going head-to-head with anybody else,” Mr Cooper said.
He added the firm was investing in resources and building capacity so that it could continue servicing its existing clients while also pursuing new business.