RSM Astute to buy IT consulting firm to stand up to 'Big Four'

MUMBAI: RSM Astute Consulting, one of India's top 10 auditors, is close to buying an IT consulting firm as it bets big on the segment to survive in the country's accounting space that is poised for a recast. It also plans to acquire auditing firms in towns and small cities to strengthen its base against the Big Four auditors that are set to become even bigger under new regulations.

The deal on the IT consulting firm is likely to be sealed within a week, said Suresh Surana, founder, RSM Astute. The company already gets a fifth of total revenue from IT consulting, and the plan is to expand it further.

Under the new Companies Act, companies would have to change their auditors and rotate them every 10 years. In India, most big companies, listed and unlisted, prefer longterm relationships with their auditors. The situation is such that auditors beyond the Big Four PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG tend to depend on one or two clients for their revenue. The new regulation would put them in trouble as they stand to lose big clients.

The rotation clause would benefit the Big Four auditors due to strong brands and demands of external stakeholders, but we believe the new Companies Act has created huge opportunities (for everyone) in the area of internal audits and risk advisory services, said Surana.

The group, which employs some 1,200 people across top 12 cities, is looking to expand to at least five other cities through mergers and acquisitions. The target cities include Vadodara, Chandigarh, Coimbatore and Nagpur. We are looking at expanding in these cities through (taking) controlling stakes in small but high-potential firms focused on internal audits or information technology services. After the acquisition, we will invest in infrastructure and competency building in these companies, Surana said.

The auditing space has seen a lot of consolidation in the past 6-8 months. Players such as Grant Thornton and BDO are also aggressively looking at acquisitions in the country. In September, Grant Thornton bought Mumbai-based Thingna & Contractor.

Industry trackers said that in the next three years, smaller auditing firms would either be acquired by the bigger firms or would risk competing directly with the big boys. While some of the auditing firms are taking the acquisition route, others, including some bigger ones, are scouting for international tie-ups. Desai Haribhakti, for instance, last week tied up with NYSE-listed corporate advisory firm FTI Consulting.

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