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The takeover, scheduled for completion in the summer, will create the UK's fifth-biggest accountancy firm, with more than 300 partners. The new company will trade under the Grant Thornton name and will have fee income of about £375m a year. Michael Cleary, the Grant Thornton chief executive, who will run the new business, said the firm aimed to increase that figure to more than £500m within three years.
While that would still leave Grant Thornton at only half the size of the smallest Big Four firm, Ernst & Young, Mr Cleary claimed the combined firm would be able to challenge its larger rivals' dominance of the audit and advisory market for Britain's biggest companies.
Financial regulators and City professionals have repeatedly expressed concern that just four accountancy firms – the Big Four also includes KPMG, PricewaterhouseCoopers and Deloitte – are responsible for the audit work of 98% of Britain's 350 biggest companies, including almost every single FTSE 100 constituent. Last week, the Financial Reporting Council, the accountancy regulator, proposed relaxing the laws on who may invest in accountancy firms, to try to help smaller companies compete.
The Association of British Insurers, whose members include some of Britain's biggest institutional investors, has also tried to persuade companies not to automatically appoint a Big Four auditor. Mr Cleary said the takeover would be 'a boost to our efforts to break down those market perceptions which would not naturally associate Grant Thornton with the larger public audit market'. He added: 'We are now gearing ourselves to stimulate competition and offer stakeholders greater choice in this space… we have considerably added to our firepower to consistently challenge the Big Four.'
David Maxwell, managing partner of Robson Rhodes, who will join the Grant Thornton board, said: 'The merger creates class-leading teams in audit and tax.'
The new company will also enjoy a dominant position in the market for audit work on the Alternative Investment Market, the stock exchange for smaller companies, where both accountants have strong positions. As a result of the deal, Robson Rhodes has called off talks with the American accountancy firm RSM McGladrey, which had been expected to result in a merger.