Business Irish

Saturday 20 January 2018

'Cultural fit and ethos are vital in any acquisition '

Crowe Horwath has agreed its first expansion in Ireland in 20 years, a bolt-on merger with Dublin firm Phelan Prescott. Managing partner Naoise Cosgrove has high hopes for his accountancy firm and the SMEs it services. He tells Colm Kelpie that clients are reporting recovery and says he intends to make sure their 'great vision' doesn't go to waste

Crowe Horwath managing partner Naoise Cosgrove says the consequences of SME debt remain after a bruising number of years
Crowe Horwath managing partner Naoise Cosgrove says the consequences of SME debt remain after a bruising number of years

Naoise Cosgrove has an appetite for expansion.

Having spent the last year sealing a merger between Crowe Horwath Ireland, in which he serves as managing partner, and the smaller Phelan Prescott, Cosgrove is open to the prospect of further growth.

The deal is the first such transaction the accountancy and business advisory firm has undertaken here since the early to mid-90s, so it is a significant move - and one that has clearly whet his appetite.

But there is nothing else in the pipeline for now, he says.

Crowe's office on Dublin's Clanwilliam Place, leased by Hibernia Reit, is getting a little crowded, and Cosgrove is hoping the capital's office market will be a little more conducive to a move in a few years' time. "Property is a key issue in terms of expansion for a practice," Cosgrove says.

"We were fortunate in terms of the recent acquisition that we were able to bring them in here. There's a small level of expansion space currently in the premises. But it's something that we'll certainly have to look at over the next number of years. It's not a priority in the next 12 months, but down the road in two or three years, we'll have to look at where we're at."

Nor is there an ambition to acquire for the sake of acquisition, he stresses. The focus for now is on the current merger, which was signed, sealed and delivered at the tail end of last year. It will add €2m in revenue to Crowe's current turnover of about €15m.

"We've only recently got regulatory approval, but we've been working on it for about 12 months with them. Their partners will become part of our practice, and their staff will become part of our workforce," Cosgrove says.

"For us, it was a first in a number of years. In more recent times, a lot of the growth has been organic and we're very conscious in making an acquisition in terms of what kind of firm that we would get involved with. It was certainly something that we spent quite a bit of time working on and making sure that the cultural fit was there and that the ethos was similar."

The move has seen the Phelan Prescott staff shift to Crowe's offices and fall under the Crowe banner. There have been no job losses.

"Our hope is that we'll be in a position to offer an expanded range of services to their clients, but equally that their clients would be very similar to our own in terms of make-up and dynamic," Cosgrove says.

Crowe Horwarth's focus is on small and medium enterprises and, while it does offer services to some multinationals, it is keen to stress that the bulk of its offering is for home-grown firms.

Those firms are now coming out of a bruising number of years. SME debt is on the wane, but the consequences remain.

"In general, the businesses that we're working with have found the last two years have been better," Cosgrove says.

"They've come through and they're seeing growth. They're more positive in terms of outlook. But, equally, there's a body coming through that need to repair their balance sheets, they need to repair the businesses.

"They probably have great vision and have seen great opportunity, but they probably don't have the capital base to exploit that."

Cosgrove says he's seen the personal impact takes its toll. "There's an overhang with some of the personal aspects. For a lot of SME businesses, it gets intertwined and interwoven. The distinction between business and personal often isn't as strong. In big corporate, there's quite strong lines. In the SME sector, it's much more intertwined. That has been a feature of the marketplace."

However, he is keen to stress that things are on the up, and now the big issues for businesses include rising costs and pressures associated with wage inflation.

And then there's Brexit.

Cosgrove says Crowe Horwath saw a surge in interest from firms from Asia, the US and mainland Europe in the wake of the vote, right up until September, as companies weighed up their options.

Company bosses are doing "fact-finding", he says, but there's little movement as yet.

"The big banks and financial service sector, my expectation would be that they will call it early," he says. "They won't wait for the outcome of the Brexit negotiations. Whereas at the end of the market that we're operating at, they're less likely to be leaders in the market. They'll be doing the analysis, the risk assessments, what the options are and making sure that they're knowledgeable, but they're unlikely to be the first movers."

They ask about establishing a company in Ireland, what's involved, what the tax regime and talent pool is like.

It's also a big issue for a number of Crowe's client companies, many of which export to the UK and have been grappling with the currency effects of recent months.

"It's a big part of every conversation that we have," he says.

"With clients, when you're speaking to them about what's going on in their business, Brexit is a hot topic. It's the one thing that everybody wants to talk about.

"It's very front and centre but I'm not sure that people are suddenly pulling out. There are no rash decisions being made."

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