The headcount tells its own story. In June, Grant Thornton employed 1,500 people in Ireland. By the end of December, the number had swelled to 1,800. In between, the firm unwrapped plans to boost its size by a further 1,000 staff over the next three years.
For Michael McAteer, the firm’s managing partner, the October expansion announcement was both a statement of future intent and an acknowledgement of the buoyancy of the market right now.
Indeed, McAteer acknowledges that the biggest issue for the firm right now is not sourcing clients but finding the right staff to service them. “The challenge in 2022 will be around jobs, it will be around resources, and being able to fulfil the demands of our clients,” McAteer said.
And the demand is coming from all areas of the economy. Despite the pandemic, vast tranches of both the indigenous and multinational economies are in rude health. With deal flows surging, corporate valuations flourishing and private equity on the march, professional services firms like Grant Thornton are rising the crest of an unlikely economic wave.
Indeed, in this week’s podcast, McAteer said that the firm was looking to boost numbers across all practice areas, and that it would have to hire in from overseas to hit its numbers.
“Are we going to find those 1,000 people in the next three years all within the Irish economy? No, I don’t think so. All of the professional services firms are growing and expanding. And there’s a finite pool of people coming through,” he said.
“So, I think we’re going to have to look into the wider market – whether that be in the European context, whether it be India, Pakistan, the Philippines, we are going to have to seek talent on a global basis to fill those needs.”
McAteer acknowledges the contradiction of such expansion in the teeth of an unprecedented pandemic.
“The only way I can actually put some sense to it is that there are multifaceted economies within our economy,” he said.
“When we talk about the Irish economy, we’ve got to break it down into segments. It is the only way you make sense of all this. If you break it down into segments such as financial services, it’s pretty fair to say that they have not been touched by the pandemic. There has probably never been as much personal wealth and cash around.”
Likewise, he said that the multinational economy, particularly the pharmaceutical industry, was thriving, as were the indigenous businesses selling into them.
However, he said the pandemic had caused havoc with other areas of the economy, particularly retail and hospitality. “They are dealing with constant lockdowns and reopenings,” he said. “And they are trying to manage the supply chain. And again, companies who supply into that sector probably have been the ones hit the most. And if it wasn’t for the government supports that have been in place, it would have been absolute carnage.”
A tsunami of liquidations?
While the state supports have provided a lifeline for pandemic-stricken businesses, they have also led to the rise of so-called zombie businesses, companies that would have ordinarily failed but are now existing on state supports. Deloitte, which tracks the level of insolvencies, said that corporate failures had fallen 36 per cent in the first nine months of 2021 compared to the same period in 2020.
McAteer, an insolvency specialist who has restructured a string of major businesses such as Eir and Aer Arann, believes there will be many liquidations when the supports end. However, he said he expected most of them to be small scale businesses.
“’I think there has to be more liquidations. But I would caveat that by saying those companies are on the smaller scale. They’re probably companies that have a significant amount of leased assets. So, when you actually look at the liquidation and the recovery for creditors, it’s going to be quite small, because they will be leasehold premises with leased assets, carrying goods that cannot be sold into the marketplace,” he said.
“There’ll be a significant number of companies, but I would not call them large scale enterprises and the knock-on effect will actually not be that big in the marketplace.”
Mergers, acquisitions and corporation tax
Regardless of who you talk to in the corporate finance space at present, the reaction is consistent: 2021 was one of the busiest years on record in terms of mergers and acquisitions. Private equity deals grew at a rate of almost 5x in the first half of last year.
McAteer was bullish when I asked him if the spate of dealmaking can last. “I think it can last because ultimately, there is the cash within the economy and the demand to do deals. There are acquisitions being made for strategic purposes. There are mergers and consolidation plays being put into place as well,” he said.
“And like everything else, though, it will come to the stage where the multiple becomes uneconomical. That’s what will stop the amount of deals. But is the appetite there? Yes. Is the economy there to meet those deals? Absolutely. Will 2022 to be as busy as 2021? I would say yes, I think it will be.”
What about 2023? “You can’t look beyond 12 months. But I think there’s enough in the tank in the first quarter of 2022 to keep the momentum going. And notwithstanding anything major that comes out of the world economy – all things being equal, I can’t see a reason why 2022 would not be as good as what we saw in 2021,” he said.
Grant Thornton has traditionally been associated with indigenous and homegrown businesses. However, in recent years, it has added several big-name multinational clients to its roster.
I ask McAteer what the response of those clients has been to corporate tax reform and the new minimum 15 per cent take rate. “I don’t think it’s going to have much of an effect because I think we’re part of the global club, and we’re far better being inside the tent than outside,” he said.
“Ultimately, those corporations were going to pay 15 per cent anyway. All that was going to happen was we were going to lose if not two and a half percent, and it would have been picked up and charged in somebody’s jurisdiction.
“It means that everybody understands what the rules are, and therefore they can plan accordingly. Because we hold on to a 12 and a half percent over what a 25-year period. I think corporates understand we’re not going to mess with our tax rules, year on year. So, 15 per cent is now the rate for those companies. It’ll be well flagged, and it will be the rate probably for the next 20 years. And corporations then can plan accordingly.”
The future of the workplace
As the head of a major company, Michael McAteer has been thinking deeply about how Covid-19 has changed the world of work and the office. In the past, he said that employers put too much emphasis on presenteeism and the number of hours that staff were working.
He said the pandemic has changed this dynamic, with the emphasis now on outputs. He said that employers were now willing to let staff work at times that suited, and from locations that suited them, once the work was done.
“That is the way it should be. Its output driven, rather than input driven,” he said.
However, he said he believed that the office would remain a cornerstone of any business, adding that it was an important tool for training and mentoring young and new colleagues. “I think we’ve got to recognise there are certain jobs and there are certain stages in your job where you can’t work hybrid, because you’re going to lose something,” he said.
As a young trainee accountant, McAteer said he learned both his trade but also the ability to read a room from watching his older colleagues. He said it was important that those soft skills were passed down to younger colleagues.
“We have to figure out how we match the needs of everybody, and we will all have to compromise in that regards. Even if you want to work more at home than in the office, you have a duty to train people as well,” he said.
Michael McAteer’s 2022 economic outlook
“I genuinely can only see positive aspects for 2022 for the Irish economy – both domestically and internationally in most of the segments that are there. The challenge will be meeting the needs of the clients, because if the clients feel we can’t grow the economy to meet their needs, they’re very global. And that’s probably the downside of this. The fact that they are mobile means they will go where the skill sets are. Multinationals are not here for 15 per cent corporation tax, they’re here for a myriad of reasons, including labour and skilled workforce. If they can’t get them here, they’ll go somewhere else.”
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