RSM global head Jean Stephens
RSM global head Jean Stephens: ‘I think where there are willing parties then that’s what you start with’

The global head of RSM, the world’s sixth-largest accounting firm, has said she is open to merger talks with rivals as the profession gears up for a potential wave of consolidation or private equity buyouts.

“If there’s some deal or some big conversation to be had, absolutely we’ll look at that to see what does that mean, what does that look like for us,” said Jean Stephens, RSM International chief executive in an interview with the Financial Times.

“I think where there are willing parties then that’s what you start with [and then it’s a matter of] what [are] the goals and objectives and what’s the business deliverable that’s going to come from [it]?”

Stephens’s comments are the clearest public indication from a mid-tier accounting group that it would consider a large tie-up or other significant transaction as firms respond to the changes in the sector, including the rapid growth of technology consulting.

Potential disruption from the proposed separation of EY’s audit and consulting arms and the prospect of windfalls for partners through deals with private equity investors have forced professional services firms to re-examine their structures.

BDO, Grant Thornton and Marcum are among the midsized firms to have explored deals in the US in recent months.

Boards of mid-tier firms were considering the implications of EY’s plan but were not yet acting, said Stephens.

A large merger involving RSM, which sells audit, tax and consultancy services, would create the fifth-largest global accounting group and the biggest challenger to the dominant Big Four of Deloitte, EY, KPMG and PwC.

RSM’s operations in 120 countries reported a 15 per cent rise in revenues to $8.1bn for 2022. BDO, with revenues of $12.8bn in 2022, is the only mid-tier firm bigger than RSM. The firms do not disclose their profits.

Stephens said her firm would consider mergers either “locally” or “on a wider basis” but added that there were obstacles to potential tie-ups.

“There’s real challenges to it because it’s important that client bases align for [a merger] to be successful. Otherwise, you’re just putting numbers together and if you’re putting big numbers together but yet the strategy isn’t aligned . . . then I think it might be a short-term positive and a longer-term negative.” 

Professional services transactions are also difficult to pull off in practice, partly because of the need for the consent of the firms’ separately owned national partnerships.

Stephens’s comments came as RSM announced a plan to double its revenues by 2030 and to increase international co-ordination of its investments in technology.

The 57,000-person firm is also examining options for the financial integration of parts of its business in different countries, she added, in a break from the traditional model of profits being retained domestically by each national member firm.

Stephens said it was not RSM’s aim to match the largest accounting firms in scale: “It’s such a big jump to . . . even the smallest of the Big Four that that’s not our ambition.”

RSM and its peers specialise in advising mid-market companies rather than the blue-chips that are the staple of the Big Four’s client rosters.

KPMG, the smallest of the Big Four, reported revenues of $34.6bn in its most recent financial year, more than four times RSM’s figure.

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