By Nitya Pandit
After closely competing with KPMG and PwC, Deloitte India has won the race to acquire boutique firm BMR Advisors. This will be the companys second big acquisition within a year, under the management of N Venkatram. Additionally, earlier this year the multinational firm added 40 partners and 500 people to its advisory team, in line with its strategy of strengthening its advisory and tax practices. The combination of BMR and Deloitte bolsters their position against EY, KPMG, and PwC.
What does this deal constitute?
This deal, finalised and announced internally on July 17th, will lead to Deloitte taking over the BMR tax team, which includes the direct as well as indirect tax partners. As a result of this acquisition, Deloitte will gain 20 partners and 350 tax professionals over the upcoming months. To keep things running smoothly while this transition takes place, BMR will ensure that there is a salary hike and will offer generous joining bonus. Furthermore, the race between the big 4’s is still not over; KPMG is assumed to be the closest to sealing the deal with BMRs M&A, corporate finance, and risk advisory team.
Gaining tax expertise
With India moving towards newly formed tax regimes, the emergence of niche firms, that can potentially operate better than the big 4 given their size, is being observed. In India, tax practices have grown at a significant rate, and pay large amounts to their tax experts. Even though the big tax firms grab large chunks of this revenue, the niche firms have demonstrated faster growth. While organisations are leaning towards risk aversion, it is becoming crucial to have tax develop expertise. Consequently, the merging of Deloitte and BMR has come at the right time.
Why did Deloitte choose a niche firm?
Big firms like Deloitte cannot compete with niche firms for family trust work, as clients usually choose small, boutique firms. Also, niche firms not only provide advisory services but also provide personal assistance through the entire process to the clientsa quality some clients look for. Additionally, some clients are attracted by the senior level personalised attention they get; as boutique firms have fewer clients and can allocate more time for each client. Furthermore, boutique firms offer hands-on experience and mentoring to young employees, which can be advantageous for the company, if the employee stays with the firm in the long run. On the flip side, big firms have both, large, international networks and clients, and established processes and systems, which makes them highly efficient. Also, they are more diverse and dont limit themselves to a niche audience, which comes with high costs.
While this strategic acquisition will lead to a potential increase in growth, revenue, and range of services provided by Deloitte, mergers are not always easy. The acquisition can be seen as a success if egos dont clash and the senior management of BMR continues to exist within Deloitte in the distant future. At least for now, Deloitte can benefit from the increase in its market share and client base. It will gain from the access to new talent and BMRs other resources.
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