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Presentation on Networking/ Merger/ Demerger of C.A. Firms

Presentation on Networking/ Merger/ Demerger of C.A. Firms. By Vijay N. Bhatt May 31,2008. ICAI - Mission. The Indian Chartered Accountancy profession will be the valued trustees of world class financial competencies, good governance and competitiveness - Mission statement of the ICAI.

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Presentation on Networking/ Merger/ Demerger of C.A. Firms

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  1. PresentationonNetworking/ Merger/ Demerger of C.A. Firms By Vijay N. Bhatt May 31,2008

  2. ICAI - Mission The Indian Chartered Accountancy profession will be the valued trustees of world class financial competencies, good governance and competitiveness - Mission statement of the ICAI

  3. Present scenario… • Increasing globalisation – world is fast becoming a single market • Accounting profession has a major role to play in world development process • Demand for specialised, experienced competent Chartered Accountants in India constantly rising

  4. …Present scenario… • The scenario of the profession in India can be best explained with the following statistics:- • No. of total members - 117080 • No. of FCAs - 53435 • No. of ACAs - 63645 Source: EDP Section on 16.6.2004 (ICAI)

  5. …Present scenario • It can be observed that the predominant composition of Indian CA firms are small in size • Sole proprietary firms/small firms are the most common form of organization • There are number of barriers that plague the growth of the small firms into medium or large sized firms

  6. Need of the hour Capacity Building Measures through through Networking Mergers and Demergers Multi-Disciplinary Services and other measures Capacity Building Measures has to be an ongoing process.

  7. Capacity building measures Networking “Networking amongst two or more firms means an entity under common control, ownership or management with the firm or having affiliation with an accounting entity or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as being part of the firm nationally or internationally” Mergers • Next step to Networking – once firms have developed sufficient confidence – venture into merger • In the corporate world, mergers and demerger have become universal practice for securing survival, growth, expansion and globalization of enterprise and achieving multitude of objectives

  8. DOES SIZE MATTER ??

  9. Advantages Capacity building measures has a number of advantages: • Pooling of resources – Expertise, Experience, Competency • Demand for one-stop-shop service can be met • Capability to handle assignments of varying complexity and dynamics • Exposure to various clients builds confidence • Risk bearing capacities increases • Dependence on large clients reduces • Professional standing improves • Helps to attract and retain talent • Client servicing capabilities improves • Ability to provide training • Investment in technology/infrastructure • Promotes specialisation

  10. Limitations The obstacles in implementation of capacity building measures can be: • Selection of firm – finding the right fit • Lack of vision • The merged entity losses its trade name and also seniority forever. • Lurking fear that the relationship with the firm pre-merger may not continue to be the same • Reluctance to share specialisation • Conservative thinking • Difficulty in trusting the other professional’s competencies

  11. Success Mantras… Dos and Donts of a successful Network or Merger… Dos… • Role/responsibility to be clearly set out • Power centre to be identified. • Institutionalisation – Firm belongs to none, to continue to perpetuity • Managing partner – person who represents the firm to be clearly identified. Clear understanding of role change within specified period • Committees of partners to be formed with ultimate powers resting with entire partnership • Administration through a committee of senior partners. Direction for implementation given to Managing Partner

  12. …Success Mantras… Dos and Donts of a successful Network or Merger …Dos • Retirement of partners to be defined • Rules for admission of new partner to be documented • HR processes to be put into place • Common brand and logo • Use of common stationery (letter heads, etc)

  13. …Success Mantras ….Dos and Donts of a successful Network or Merger Donts • Total power should not be put a single partner/individual • Multiple power centers /processes should be avoided • Avoid creating immoveable properties • No ambiguity regarding key areas such as sharing of profits, responsibility, retirement & admission of partners

  14. Implementation Strategy Approach towards Networking and Merger: Step I – Identifying the firm/firms. This can be done either through a Merchant Banker or by direct approach Step II – Meeting of minds. A presentation by all involved parties giving their strengths, resources, client list, etc. Step III – Discussion of vision. Find a commonality of goals/objectives Step IV – Agreement drawn. To clearly state role/responsibility, income sharing, etc. Step V – Trial period to be recognized. Work towards successful partnership

  15. Thank You

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