The History of McGrathNicol

01 July 2024

In the days before Christmas 2003, Tony McGrath took a late-night call from his then boss at KPMG.  

The introduction of the Sarbanes-Oxley Act in the US meant that KPMG could no longer provide corporate recovery services to certain audit clients, including key banking clients. This dilemma faced many professional services firms at the time and would become the impetus for creating one of Australia’s top restructuring and advisory firms.

In 2024, McGrathNicol celebrates 20 years in business.


A new world

The Sarbanes-Oxley Act – introduced in 2003 following the collapse of energy trading and utility company, Enron – changed the world of auditing and consulting.

Enron’s collapse was blamed on accounting practices, and ultimately its auditor Arthur Andersen went out of business. The fallout led to new laws that meant auditing a business that operated in the US, as several Australian banks did, barred the provision of other consulting services to that business.

To KPMG’s chagrin, the response was to consider separating its restructuring business. By February 2004, the discussions were serious.

Colin Nicol headed up the negotiations for the separation.

“It was a bit more than a business deal because a lot of emotion was involved,” he explains.

“We got there in the end and were fortunate to get a remarkably good deal from KPMG. We took the people we wanted. We took the work we were doing. And we had transition arrangements to stay on the premises and access IT support for 12 months. Because of that, we were able to set up the firm fairly painlessly.”

“Ultimately, it was a business decision and there was no animosity. They allowed us to separate without tying our arms behind our backs,” McGrath adds.

Jason Preston worked within KPMG at the time and is now the Executive Chair.

“Looking back, it was an interesting time for the industry, a sort of upheaval. Tony, Colin and the founding partners played the hand they were dealt and created something different – a new firm with a new identity.”

From early June 2004, 14 KPMG partners and 140 employees became part of the newly formed McGrathNicol with the firm officially opening its doors on 1 July 2004.


What’s in a name?

In the months before registering the company, finding a name proved difficult.

“Carabiner Partners was an option,” remembers founding partner Jamie Harris, who is now the National Managing Partner. “We sat in a room and watched a seemingly never-ending slideshow of options but none of the names felt like us.”

In the end, pragmatism beat creativity. Tony McGrath was chair and had the highest public profile for his work on the HIH Insurance collapse; Colin Nicol was the chief executive officer. 

Ultimately, the name came from the financial press writing about the issues driving the separation. The new firm became McGrathNicol & Partners, which eventually morphed to McGrathNicol.


Building a new firm

In 2004, communicating by fax machine was more common than by email. Documents were sent through the post. The pace was slower. Almost invariably, clients were one of the big four banks and most engagements ended in the sale or closure of a business.

McGrathNicol adopted an unusual national approach from the outset, setting a solid foundation for growth.

“Tony and Colin divided up the jobs and responsibilities appropriate based on their strengths,” recalls one of the founding partners, Robyn McKern, who was CEO from 2011-2016.

“McGrath was the head of the Sydney office who remembered not just everyone’s name, but what they did on the weekend as well. And he was genuinely interested in finding out about it. Nicol was more of a straight shooter, ferociously numerate and capable, and a tough negotiator.”

“It was fantastic to have both of them involved because it meant we weren’t a Sydney firm or a Melbourne firm,” McKern adds.

“Colin put together a partnership agreement that made sure we were all motivated to do best for the business, not best for our own patch.”

Another founding partner, Shaun Fraser, who has been in the restructuring and insolvency business for more than 30 years, agrees.

“It was the first time that we had genuinely worked together as a national team. KPMG was historically made up of state-based partnerships,” Fraser says.

“At McGrathNicol, we were bound together in a much tighter way because we only got paid if there was a profit and, as a smaller group of people, we were focused on making that work.”

“I was a new partner out of Perth and had been out of the country for a few years. But I felt I could call on any of the other partners for help, whether they were in Brisbane or Sydney or Melbourne. And I suspect that was the same for everyone.”


A running start

The partnership had a running start to their new business. Led by McGrath, the corporate recovery team was already working on the collapse of HIH Insurance at KPMG and the business followed them to McGrathNicol.

To this day, HIH Insurance remains the largest corporate collapse in Australian history. Its demise in March 2001 left thousands of builders without insurance cover, and tens of thousands of employees without jobs. Shareholders lost their money, and eventually, founder and chief executive officer Ray Williams went to jail.

HIH Insurance became synonymous with McGrathNicol’s insolvency practice. In the world of insolvency and restructuring, having Australia’s biggest corporate collapse on your resume is good for business.

It also put the new firm under the spotlight, not just from the investment community but from the media and government as well.

Following HIH, came two more high profile engagements – South Australian-based automotive parts maker ION and mining services group Henry Walker Eltin (HWE). The fledgling business needed the work, and with ION keeping Melbourne and the southern states busy, Sydney and the northern states focused on HWE.

McGrath was never concerned about winning work, confident that the former KPMG partners had strong relationships with the major banks. He was more concerned about running the business, given how busy the senior partners were.

“I was worried about the back office and how that would come together,” McGrath explains. “In the end, it came together remarkably well. We had time to think it through before we launched. We had good back-office management people helping us out. It was daunting but, by and large, we had a good team structure and we trusted each other.”

Like a typical start-up, in the early years, the business was “run on the smell of an oily rag”. But the partners soon found the freedoms and opportunities in their new venture outweighed the risks.

Nicol, who retired from the firm more than a decade ago, says breaking away from KPMG was a freeing experience. “It was liberating not having the overheads and bureaucracy that come with being part of a Big Four firm.”

“We were able to reshape the business our way and make our own decisions. And we maintained our values ‒ quality, integrity, how we treated our people. It was fantastic. Absolutely fantastic.”


Success breeds success

The first three engagements – HIH, ION and HWE – quickly highlighted the need for forensic accounting expertise. Initially, the young firm outsourced the work to their old colleagues at KPMG but soon recognised the opportunity to develop an in-house capability. The partners recruited a team of forensic accounting experts to support the insolvency and restructuring business.

By 2007, McGrathNicol had been operating for four years. It had three of the largest insolvencies in the country and a successful forensic accounting business. It had also dipped its toe into the mergers and acquisitions world.

Then came the global financial crisis.

The GFC ushered in a period of extreme stress in global financial markets and banking systems ‒ officially lasting from mid-2007 through to early 2009, but with impacts that are still being felt today. It created a huge amount of work for restructuring and advisory practices.

“By the time the GFC insolvency work started coming in, the forensic accounting and advisory practices had already built their own profiles and were winning their own work,” says current managing partner Jamie Harris.

It got very busy.

In the hectic years of 2008 till 2011, staff numbers doubled. “Some of our engagements included childcare provider ABC Learning, subsidiaries of global investment firm Babcock & Brown, property giant Centro, agribusiness scheme Great Southern, car parts maker Autodom and financial services outfit Banksia,” Preston recalls.

Eventually, the global economy began its recovery and as the GFC work started to slow, the benefits of having an advisory business became apparent.


Advisory takes off

The advisory capability within McGrathNicol started as an offshoot of insolvency and restructuring work. From inception, partners realised the benefit of being more than an insolvency firm. Advisory functions, including forensic accounting and mergers and acquisitions expertise, presented major opportunities for the fledgling firm.

But McGrathNicol faced a formidable challenge: its reputation was as the pre-eminent restructuring and insolvency firm. The firm was not known for its advisory capabilities.   

Solving that meant recruiting differently, shifting away from the well-worn path of insolvency partners and being more lateral about who came into the business. It also meant redesigning the business, pivoting to become an advisory firm with a very proud history in insolvency and restructuring.

McGrathNicol needed to transition and the middle years of the second decade of the 2000s weren’t always easy.

“During the GFC, we got swamped with insolvency work,” Harris says. “We got to a very uncomfortable size. Here in Brisbane, we had 60 seats in our office and 70 people that needed a chair. And this was way before work-from-home.”

The first decade of McGrathNicol was a story of its restructuring business, the second can be categorised as the growth of their advisory services.

In 2017, revenue started rising again thanks to the advisory business and its growth in cyber, government work and an expanded deals practice. What began as a forensic accounting business also shifted into data analytics, geopolitical risk, national security and performance improvement.  

The expanded offering now sees the firm acting as expert witnesses in Royal Commissions, responding to large cyber incidents, supporting complex carve outs and acquisitions, and investigating some of Australia’s most high-profile financial crime matters.


Structure and sustainability

Two decades after opening, McGrathNicol has grown from 14 partners and 140 people to 54 partners and over 350 professionals. When asked about the key to McGrathNicol’s success, the founding partners put it down to the talented people at the heart of the business.

“I am incredibly proud of what we have established – a business with structure and sustainability that can reproduce itself,” Tony McGrath says. “The business is growing, the brand is strong and it’s a multi-generational business like a big four accounting firm, not reliant on one or two partners.”

“We all recognise that McGrathNicol didn’t just happen. There was 30 years of [KPMG] history before that. We inherited a strong ethos of working hard and being very ethical. We are straightforward, honest and transparent, and it just makes life easier.”

Similarly, Nicol attributes the success of McGrathNicol to hard work.

“We knew what we wanted and the kind of people we wanted to attract. We also had some external things like the GFC go in our favour,” he says. “I was immensely proud, and still am, of what we did and of those who are now running the firm.”


What’s ahead?

When asked about what is next for the firm, Harris says “It will always be about putting our people and clients first.”

According to Jason Preston, every job is an opportunity to differentiate the firm.

“We want to maintain our position as an industry leader, and do it as senior partners transition out and new partners transition in. The business will continue to evolve and many of our clients will increasingly be multi-nationals,” Preston says.

“McGrathNicol isn’t growing for growth’s sake. It’s about being the best at what we do, and twenty years from now, our focus will be the same.”