2 days ago
- Business
- The Herald Scotland
Scots accountancy chief reveals acquisition plans for Azets
He disclosed the ambition in an exclusive interview with The Herald, in which he underlined the difficulties which the current economic uncertainty was causing clients. Business owners are looking to the firm for advice on how to manage challenges such as the recent rise in employer national insurance contributions and forthcoming changes to inheritance tax against a shifting macroeconomic backdrop that has been rocked by Trump tariffs and geopolitical tensions.
The Scottish part of Azets began to take shape in 2017, when Scots accountancy firms Campbell Dallas and Springfords became part of Staffordshire-based Baldwins, which in turn was part of the Cogital Group. Campbell Dallas then merged with long-established Scots accountancy firm Scott Moncrieff under the Cogital umbrella, before Cogital was subsequently rebranded as Azets in 2020.
Azets has a presence across the Nordics.
Mr Gallanagh had been a partner at Campbell Dallas for nearly 20 years before its acquisition by Azets. Speaking in the Azets office in Braehead, he said the firm's growth over recent years has been powered by a flurry of acquisitions, with turnover on course to reach £330 million in the current financial year. He said the firm will continue to assess potential deals but will be more selective in terms of targets.
The most recent deal struck by the firm in Scotland was the acquisition of Paisley-based Milne Craig in August. The acquisition saw more than 90 staff join Azets, lifting the number of people employed at its Braehead base to 320.
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Mr Gallanagh, who has been Azets' UK chief executive since 2022, said: 'We are very choosy now on how we acquire. The marketplace is, from a consolidation perspective, getting significantly harder. At one point, we were the only private equity supported firm and now there's about 50 supported in the private equity space. It is getting harder to acquire good businesses, but we are very conscious that we bought some businesses at the outset… that maybe aren't businesses that we would buy now. And we have made some wonderful acquisitions in recent years.'
He said that Azets will now only acquire firms that have the potential to enhance its offer or fill a 'geographical white space that we have, and it doesn't take a rocket scientist to see where we are looking at'.
Mr Gallanagh declared: 'If you look at the East Anglia side of the UK, you have got a big white gap in there. We are under-represented in London and Birmingham, and we can do a lot more in Manchester, and even in Scotland. There are spaces in Scotland we want to do more.
'We are in discussions with some firms in London and have one in the east side of England. We would be hopeful that we could conclude that before the end of June.'
He added: 'It is no longer about just buying businesses for the sake of buying businesses – it is ensuring that they are adding value to what we have and most importantly that their culture is aligned to ours. A lot of our time is spent now on the culture of the business before we acquire, which is really, really key.'
Asked to gauge sentiment among the firm's client base, Mr Gallanagh the uncertainty caused by global events and macroeconomic headwinds, including US tariffs, is 'causing concern pretty much across the board'.
He said: 'It is across the whole of business, it is not in any particular sector. That uncertainty brings a real nervousness for people. I think the second thing is the changes in tax – the increase in national insurance [and] increase in the living wage which are putting a strain on already strained businesses.'
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This pressure has led firms to cut costs, including ESG (environmental, social and governance) and marketing spending, while investment plans are being held back because of changes to agricultural property and business property relief. These changes are part of reforms by the UK Government to raise more money from inheritance tax (IHT).
Greig McKnight, Azets' regional managing director for Scotland, said: 'The changing tax environment is on all our clients' minds. Peter referenced the IHT impact – suddenly a lot of business owners have got a change in the landscape. The business property relief is being taken away, so they have got potentially a 20% IHT liability. That is impacting almost all of our clients and that has a knock-on effect on the decisions that they take.'
Mr Gallanagh said the IHT changes are seeing family firms 'bringing forward conversations' around inheritance tax, when previously the issue may not have been discussed, in some cases until it was too late.
He said: 'Now those conversations can happen up front. We would rather have them upfront without a 20% tax cloud hanging over our heads, but hopefully in the longer term a lot of businesses will have better succession planning in place.'
