Evan Vitale Consulting: RSM Astute Consulting plans acquisition to gain from change in Companies Act

Friday, January 2, 2015

RSM Astute Consulting plans acquisition to gain from change in Companies Act – Economic Times

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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 major shuffle. It plans to also 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 RSM Astute founder Suresh Surana. 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 ten years. In India most big companies, listed and unlisted, prefer long-term 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 around 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.

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