In August there was plenty of noise around the announcement that the former boss of accounting giant Deloitte, John Connolly, was starting a new bean-counting business, Cogital.
The question was whether the project, which was innovatively backed by private equity house HgCapital, was the latest attempt to break the stranglehold of the Big Four?
If anyone might be able to do it, then it would be Connolly. For many he was pivotal in changing the fortunes of Deloitte from being the smallest of the Big Four in the early noughties to its current position of either being either at, or close to, the top of the UK accounting pile.
Big four challenger?
Despite the noise that surrounded Connolly's return, he insists Cogital is not intended to be a challenger to the Big Four of Deloitte, PwC, KPMG and EY. He said:
We are not trying to deal with clients at that level. Our focus is primarily providing advice to smaller firms.
We will provide some outsourcing for companies but not the kind of companies that Deloitte or PwC deal with. We have no plans to be become a big audit firm.
Nevertheless, Connolly did concede that recent reports led to some awkward conversations. “I did end up with calls from some of the people,” he told City A.M.
Cogital’s speedy acquisitive drive means that, once all the deals complete, the group will have over £300m of revenues. But Connolly still doesn’t think that any of us all colleagues or rivals feel threatened.
In fact, he does even see them as old rivals:
They’re all old friends - three of the Big Four were aware of what we are doing because I told them what we are doing. They all wished me well so I’m sure that [being positive about his project] is the case.
Small and big
The strategy with Cogital is to create “a different kind of firm”, bringing lots of smaller entities, each with a traditional small-firm business model, under one umbrella. Then the plan is to add a technology twist to the firms, which it is hoped will bring them up to speed in today’s market.
“We will be quite large and international but focused on that really important segment of the market that is vital – smaller businesses [and] entrepreneurial businesses.
“While we want to apply technology,you have to deliver locally. You look at your adviser and want someone you can be in contact with. You always want to have that principal relationship with that partner or director. We would always have lots and lots of local offices,” he said.
While playing down big player intentions, recent purchases that include Nordic outsourcer Visma and UK accounting firm Baldwins are just the start of M&A activity for Connolly.
We will continue with acquisitions. We’ve got quite big ambitions to grow the business. We’re in the fortunate position of having some scale immediately in that we will have in excess of 3,000 people.
Initially we see the business as a European business. We don’t have any grander ambitions at this stage to go beyond Europe. That might come… We’ve got quite a pipeline in the UK and Nordic regions on our list as potential transactions.
A long time coming
In terms of the services the group intends to provide, there will be a significant slant away from audit and towards advisory work.
Nevertheless, a core of statutory services will be undertaken by a separate regulated entity in Britain and the whole project has been meticulously planned with relevant bodies brought on board.
“We’ve been planning this for a significant amount of time.
“We have worked very close with the Institute of Chartered Accountants. In fact I got a congratulatory note from the chief executive the other day. They have been very aware, I spoke to them over a year ago.”
The plan to start from scratch is somewhat unusual for anyone who has led one of the Big Four. After their time at the top, most prefer to steer a path far away from the profession, often settling for more sedate endeavours.
But heading for the hills quietly doesn't suit Connolly. So why has he chosen to do this? The answer is simple: “Well, I like building businesses. I enjoy building business and creating value. I like advisory businesses, I like people businesses.”