After months of damaging revelations about its former chief executive John Delaney, taking on the Football Association of Ireland (FAI) as an audit client was the proverbial poisoned chalice. Accountants Grant Thornton did just that midway through 2020.
In December, the firm said the FAI's near €70 million liabilities at the end of 2019 left a material uncertainty over its ability to continue as a going concern. Around the same time, the FAI began legal action against Grant Thornton's predecessor, rival firm Deloitte.
However, Michael McAteer, Grant Thornton's newly re-elected managing partner, rejects any notion that trust in the association cannot be restored. "I would call that a very defeatist attitude," he says. Transparency will be key to reviving its credibility in the eyes of the public, Government, Sport Ireland and – most importantly – its own grassroots members.
“People have got to believe in the institution, they’ve got to believe it’s open to scrutiny, that people are in it for the right reasons, they’re in it for the good of [the] game and the community rather than what’s good for them.
“Football, soccer, is a grassroots game, it will be played always when somebody has two jumpers and a football in their hand. And everything can be fixed. As long as the will of the people is there, and there are so many good people in football who give so much time and effort, I just can’t believe that nothing can be saved.”
McAteer, a Manchester United supporter, knows a thing or two about saving and restructuring businesses. When his old firm, Foster McAteer, merged with Grant Thornton in 2008, he became a partner in its insolvency practice, which took on hundreds of cases during the recession that began that year. These included the Quinn Insurance administration and the liquidation of boom-era property player, Treasury Holdings.
Insolvencies were back in the news as 2020 closed. The Irish subsidiaries of British fashion chain Arcadia and German payments group Wirecard appeared in the High Court recently. Ken Fennell of Deloitte was appointed liquidator to both in proceedings that are part of wider insolvency cases being run from their home jurisdictions.
Meanwhile, Oslo-based Norwegian Air Shuttle, along with Irish subsidiaries Norwegian Air International, Arctic Aviation Assets, and three leasing companies, recently got protection from creditors in the High Court, which appointed Kieran Wallace of KPMG as examiner.
The Republic's ability to attract foreign investment means that many multinationals have Irish holding companies that are key to their overall operations
The Scandinavian carrier chose the Republic as its 140 aircraft, obviously its key assets, are held through Irish-registered companies. It’s not the first to choose this jurisdiction to shepherd it through insolvency to a rescue and McAteer believes it is unlikely to be the last.
“There are two factors at play,” he explains. “One, our processes here are world class in the sense that our ability to restructure companies within the examinership process is as good, if not better, than any other process anywhere else.”
The second, he says, is the Republic’s ability to attract foreign investment means that many multinationals have Irish holding companies that are key to their overall operations. This allows them to say that this jurisdiction is a main centre of interest, and so avail of its laws.
Brexit could play a role, as companies cannot be sure that the EU will recognise UK insolvencies as the latter has left the bloc. "So, if you've got a global or US company that's looking to restructure in Europe, where it would have naturally gone to London, they now can come to Dublin with absolute certainty that it will be recognised in Europe."
Last year, the High Court appointed McAteer as examiner to Texas-based oil and gas industry services group Weatherford, which had almost $8 billion in debt that was converted to shares as a result of the Irish process. Its holding company was here.
"There are global restructuring centres all over the world," he notes. "I mean, London is a restructuring centre, Singapore, Cayman, they're global centres. Could Ireland become a centre for restructuring companies? In the European market – yes."
It would be impossible, he argues, for global companies to go through 27 different processes at different speeds across Europe. One centre is more efficient. McAteer draws a parallel with the development of the aircraft leasing industry here, which emerged because participants built up knowledge and experience through GPA. Specialist law and accounting firms could emerge to handle global cases. But the business is likely to create "hundreds of jobs, not thousands".
Many feel that aircraft leasing itself could be one of those industries facing multiple insolvencies following the Covid-19 pandemic. The Republic is home to more than 50 lessors, including 14 of the top 15 companies in the business, so there is a strong chance that any rescue or wind-ups would happen here.
Lessors buy aircraft using their own cash and loans from banks or other lenders. They repay their debts from the rent paid by the airlines that lease the planes. If an airline cannot pay, the lessor can repossess the craft. But leasing companies allowed airlines to defer rents while Covid-19 grounded flying. Wholesale repossessions would spark a crisis similar to the financial collapse in 2008, hitting revenues and sending asset values plummeting.
Grant Thornton’s audit business has several aircraft leasing clients. McAteer argues that at this stage, all parties’ interests are aligned. “My view is that the lessor’s initial reaction will always be to support its customer because it does not do it any good to have an overcapacity of aircraft in the world.
“You could take the view that if Covid stopped tomorrow morning, and someone could flick the switch, would everybody start flying again? Because it isn’t the case that it’s impacting on the consumer spend. That money is there, and as soon as people start flying again, well then, it’s a blip, it’s a one-year hibernation period.”
Savings are at a record level – €25 billion according to some estimates – so that demand is waiting to be unleashed
This is a point that McAteer makes several times during the interview: the crises sparked by Covid are temporary. Unlike the recession that began in 2008, where businesses and consumers had debts they were unable to repay, essentially freezing activity, many people have the cash as they held on to their jobs. Savings are at a record level – €25 billion according to some estimates – so that demand is waiting to be unleashed.
"I think what's different this time is that the economic spend or the financial wellbeing of the consumer hasn't been as impacted as it was in 2008. So what I mean by that is that if you're in technology, Google or Facebook, your salary hasn't actually been affected. You're sitting at home with exactly the same pay packet. So I think when the economy reopens, we saw this in September, that pent-up consumer demand is already sitting there and ready to spend."
Reopening will depend on the speed of vaccination. McAteer calculates that we should begin seeing a change from Easter onwards. In the meantime, the same alignment of interests applying to aircraft leasing works for others as well.
He explains that it makes no sense for a landlord with a good restaurant tenant to force that business out when there was nothing wrong with it in the first place and there is a good chance that it will recover. Consequently, if people are smart, he believes there should be no need for widespread liquidations.
Nevertheless, he acknowledges that Covid-19 has accelerated changes in some businesses, so things will not be the same once the pandemic has finally passed. The shift to online from traditional shopping is one of the more obvious examples. Retailers will have to get the best of both the digital and in-person worlds to survive.
The virus may have shifted shoppers’ priorities in other ways also, they’ve realised that buying Irish products, or from local businesses, instead of simply seeking the lowest price from wherever in the world, has an impact on jobs. “I do myself, and talking to other people, they’ve favoured Irish online companies for purchasing things, but you need to be online for the consumer to support the company,” McAteer observes.
From Artane on Dublin's northside, where he went to the local St David's Christian Brothers' School, McAteer skipped university and went straight into Farrell Grant Sparks as a trainee when he was 17. It was 1986 and a recession was in full swing. He "fell under the spell" of Chris Farrell, and began working in insolvency from the off.
“What appealed to me was the wheeling and dealing and understanding what made businesses work and not work, and understanding what went wrong and what could have been done differently,” he says.
He qualified at just 22 and three years later went to Australia, returning in 1999. He and Brendan Foster set up a practice together, growing it from three to 50 people by the time it merged with Grant Thornton in 2008.
These days the firm has 52 partners, employs 1,480 people in seven offices, including Belfast, Cork, Galway, Limerick, Longford, Newbridge as well as its Dublin head office. Fee income for 2020 should be about €150 million.
“We’re growing year on year. I think there will be more modest growth in 2021 because it has to reflect the economy that we operate in, and I think how good 2021 is really depends on how quick normality returns.”
Insolvency helped Grant Thornton carve a position in a market where it was challenging the bigger firms, which had a more established presence here. McAteer observes that no one ever got fired for hiring IBM. So the key to building the business was getting around potential clients' natural inclination to use one of the Big Four firms – EY, Deloitte, KPMG, and PwC.
“When the brand has become synonymous with the largest restructurings, it’s seen [in] the same light as the others,” he explains. “It is not as much of a risk now for a firm to choose Grant Thornton.”
Insolvency amounts to less than 5 per cent of a business that embraces the key services offered by accountancy practices. “Audit has done extremely well,” he observes. “Audit reflects the economy in the sense that as the economy grows, more businesses grow themselves, therefore, the need for audit services grows as well. We’ve got a tax business which I think again would be very similar to the audit business in the sense of reflecting the economy.”
It's a democracy, so if there was unhappiness with 52 people, if people were unhappy with the leadership, then somebody else would have run against me
McAteer stresses that these operations do not necessarily shrink once the economy travels the other way, but a reverse does make it harder to sell into those markets. Alongside those two mainstays, Grant Thornton has a general practice that includes forensic accounting, technology, consultancy and operations customised to the needs of the Republic’s international financial services industry.
“So, as the firm has got bigger we’ve specialised, audit, advisory and then within that, very bespoke services that basically reflect the growing financial services market here.”
His colleagues did not oppose McAteer’s bid for a second term as managing partner, something he takes as a sign they were happy with the job he did during his first three years at the helm. “It’s a democracy, so if there was unhappiness with 52 people, if people were unhappy with the leadership, then somebody else would have run against me,” he says.
“If you look at a three-year term, the first is kind of getting your feet under the table and understanding the nuances. You start to put your own stamp on it by year two, and by year three that momentum is starting to build.”
His second spell is very much a continuation of the first. In 2019, he came up with a strategy, Empower 2023, meant to “empower our people and clients” to achieve their ambitions.
“It might sound clichéd,” he acknowledges, before explaining that its focus is to hire the right people and invest in them. “Our clients will also benefit because they will have the best people working for them.”
McAteer’s goal for the next three years is the one he says every managing partner has – to leave the firm in a better position than when he took over. He will not go for a third time, as he risks running out of ideas and energy. “I think six years is perfect; you can actually get stuck into something for six years,” he says.