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Money makers

by mel starrs on November 6, 2007

in Uncategorized

  Not content with providing one post a day for November, I’ve managed to catch up on some reading and have for you a bonus post today.

  Great piece over at BD by Paul Morrell on why companies sell up. I agree with most of what he says, although I do think that listed companies provide a transparency (with regards to published information, accounts etc) which professional services partnership does not necessarily have. The industry is predominantly not publically listed. Here’s a snippet from some research* I did for my MBA dissertation (it will be slightly out of date by now):

  Companies in the UK have been identified by using the Standard Industrial Classification (SIC) of Economic Activities codes. The relevant SIC code for the industry is Group K Real Estate, Renting and Business Activities, 74.20 Architectural and engineering activities and related technical consultancy

  The subcategory for engineering consultancy is 74.20/4: Engineering consultative and design activities. This subclass includes:

  – advisory and consultative engineering activities

  – engineering design activities for:

  . the construction of foundations and building structures

  . mechanical and electrical installations for buildings

  . the construction of civil engineering works

  Searching under ICC Plum database, there are 26,306 companies employing 225,000 people in the UK classified under 74.20, of which 956 are under 74.20/4. Of these, only 14 are quoted on the stock exchange. Around 60 have opted for LLP status. The vast majority are private limited companies with share capital (over 750). This means quality publicly available information is in limited supply, making financial comparisons difficult and unreliable.

 The point I liked most about Paul’s piece was the bullsh*t fed to the staff about why the management are making the move towards raising capital:

  Nor is selling the business necessary to share those rewards more broadly, so please don’t say it is for the good of the staff — who see both the prospects of advancement and the direction of the firm move further away.

  So if you work for a practice whose partners dribble out that message, give ’em a spank while it’s still legal.

  Yep. Been there. Tell the truth – the founding members are ready to retire and want to make some cash to sit out their dotage on. A recent case springs to mind…

  *Use this data at your own risk, blah, blah, blah…