Baker Tilly, the U.K. firm that was one of the original 14 firms that founded the Baker Tilly International accounting firm network and its namesake, has switched its affiliation to the RSM International network, whose founding member firm in the U.S. is McGladrey.
McGladrey managing partner Joe Adams welcomed the move last week, noting that it would provide his firm’s middle-market clients with access to one of the United Kingdom’s leading firms and increased global service offerings, as well as help his firm develop new business with companies that have global operations or aspirations.
Baker Tilly has more than 40 offices across Great Britain. McGladrey and the Baker Tilly team in the U.K. plan to form a strong bilateral relationship to provide services to clients while growing their cross-border business.
With auditing regulators in the European Union and the U.K. on the path to requiring public companies to either rotate their auditing firms or retender bids for audit work periodically, McGladrey sees an opportunity to attract more audit clients from the Big Four.
“With rotation and things like that, certainly that was part of the reason,” Adams said in an interview Thursday. “They have a very strong U.S. capability and a strong Asian capability. I think that was important from a U.K. perspective, so we certainly feel it strengthened our ability to compete for middle-market public companies.” In terms of industry specialization, he noted that Baker Tilly has a strong presence with manufacturing, financial services and energy industry clients.
The move was sparked when Baker Tilly acquired RSM International’s previous U.K. member firm, RSM Tenon, last August. That acquisition presented Baker Tilly with the choice of either staying in the Baker Tilly International network or switching to Tenon’s network, RSM International. After a period of detailed consideration, the firm decided that RSM better aligned with its client needs and international growth aspirations.
“Probably the impetus for the conversation and the dialogue which ended up with them joining us was the fact that they had bought RSM Tenon,” said Adams. “When Baker Tilly bought Tenon, we no longer had a firm in the U.K., so getting Baker Tilly to join our network has provided us with a seamless transition to a great degree for our existing clients who are already using RSM Tenon, and now they can continue to use the same people.”
The way the network works, he noted, the most important thing is making sure that clients are well served. “We didn’t immediately start changing the relationships, and now we don’t have to even think about it because they’re all part of RSM now,” said Adams.
McGladrey saw few other available firms in the U.K. that weren’t already affiliated with the Big Four.
“When Tenon was purchased by Baker Tilly, we clearly evaluated the alternatives we had, and we had engaged in some dialogue,” said Adams. “But most importantly, we began talking to Baker Tilly. They had expressed an interest in joining our network and there was a good strategic fit. We serve the same types of clients and provide the same types of services, and clearly there was an opportunity to work together. We had multiple meetings around the world with them just to make sure that the rest of our members were comfortable and to make sure that Baker Tilly was comfortable with the rest of our global membership. Everything just proceeded very positively toward the conclusion that we reached.”
Adams said there were no special inducements given to Baker Tilly to convince the U.K. firm’s leadership to change networks.
“I don’t think there weren’t any special inducements, so to speak,” he said. “They joined under a framework that we have in place for all our other members. I think some of the benefits they saw were the strong global members that we have, in particular in Asia. We have some very strong members in China, Hong Kong, Singapore and Australia, and then they looked at the U.S. Instead of working with 12 to 14 different firms that made up Baker Tilly, McGladrey is one firm that has locations across the country. They looked at our size, being the fifth largest firm, with a middle-market focus in the U.S., and I think that was very attractive to them. They felt that McGladrey and RSM International were in a better position to really serve the clients they had going forward in the long term.”
Baker Tilly managing partner Laurence Longe sees the move as benefiting the firm and its clients. “Membership in the dynamic global network of RSM will bring huge benefits to Baker Tilly and we believe it to be in the best interests of our clients, partners and staff,” Longe said in a statement. “Working with McGladrey will give us much greater scope for opportunity in the U.S., as well as offer better potential for international expansion for the clients of both firms. Having met the McGladrey team on a number of occasions, it is clear that we are aligned to their strategic vision and values, and we very much look forward to working with them and exploring new opportunities in the future.”
At some point after a transition period, the Baker Tilly U.K. firm will rebrand to take on the RSM name and distance itself from other firms in the Baker Tilly International network, such as Baker Tilly Virchow Krause, the network’s flagship firm in the U.S. Adams hasn’t heard which U.K. firm will replace it in the Baker Tilly network.
“When we were looking at our alternatives there weren’t a lot,” he pointed out. “A lot of the firms have already been acquired by the other large global networks. There are still some good independents, but nothing the size of Baker Tilly.”
McGladrey does not plan to acquire Baker Tilly’s U.K. firm, and having the firm in its network will suffice for now. “Generally we’re happy with the way that the structure exists for the global network now,” said Adams. “Having Baker Tilly as one of our network firms really helps us from the perspective of servicing clients. Whether or not we would need to control that from an acquisition, we haven’t really contemplated that at this time.”
But McGladrey will continue to look to expand in other markets besides the U.K. “We certainly feel like we have added strength and a very important market to us, and we continue to look at other markets and try to continue to grow our global brand,” said Adams. “We’re very happy with what we have in the U.K. now, and we can pursue some other alternatives where we need to get better, or we may not have an affiliate in a certain locale.”
Adams noted that McGladrey and Baker Tilly remain independent firms, as do the RSM affiliates in China. “But what we do is we work together to serve our global clients and to pay the costs of the network,” he said. “We all contribute to that.”
“This is an important step in positioning the RSM network as the leading global service provider focused on middle-market businesses,” said Mike Kirley, chief operating officer and international strategy leader for McGladrey and chairman of the RSM International Board of Directors. “We understand today’s global business environment and combine that knowledge with keen insight into middle-market leaders’ needs to help them access the right resources around the world to enhance their success.”
McGladrey plans to welcome the U.K. Baker Tilly leadership team to its Chicago headquarters to kick off the new relationship on May 27−29.
“From a middle-market perspective we certainly think it puts us in a much better position to continue to grow our middle-market client base,” said Adams. “We’re very happy and excited to be working with them.”
In addition, McGladrey has its own McGladrey Alliance, a separate division that provides assistance and access to some of the firm’s specialty skills, audit methodologies and training to other CPA firms in the U.S. and outside the U.S., which pay McGladrey a licensing fee. As with the network arrangement, those firms also remain independent.