In The Spotlight: Kelly Partners Group Holdings Ltd (ASX: KPG)
Brett Kelly learned the invaluable trait of resilience from a young age. He had little choice, growing up with five brothers and two half-brothers. Four were older, three younger.
From the age of 14 he worked at his local chemist in Sydney suburbia delivering prescriptions on his push bike, washing the neighbour’s cars and blower-vacuuming tennis courts.
In 1993 he went straight from school to an undergraduate cadetship for four years at Price Waterhouse and then into what was supposed to be the glamour career job that would set him up for life, at an investment bank.
But the brutal reality was that he was miserable. In 1997 he was unexpectedly made redundant.
“When I lost my job, I felt relief. It helped me understand that what I thought was the worst thing that could happen in losing my job was not as bad as I had thought. It gave me the chance to work through what were my gifts and talents. To reflect on what work I could do that would make a difference rather than doing the things expected of me,” he now says.
“When you do well academically there are many people with a view as to what you should do. You must find your own vocation, a place where you can be useful to others. So I went back into accounting and then finished my chartered accountant qualification and Master’s degree in Taxation.”
In 2006, Kelly and wife Rebecca - who had both worked in accounting firms - had a vision to build a business that would be great for accountants, clients and communities.
Kelly&Partners was born.
Over almost two decades the firm has grown by buying small, suburban accounting firms and folding them into the group.
While Kelly says most people think of Kelly&Partners as an accounting firm, it is actually a business system.
He describes its secret sauce as knowing its mission to “help private business owners who employ 70% of all Australians and understanding the importance and dignity of that work.”
“It is quiet work that makes a huge difference to our community. Connecting the work to the meaning for our people drives our sense of purpose,” he says.
“We have a business system that frees up our people to do their best work, having the best large firm resources while maintaining control of their local business.”
Kelly, who is the firm’s largest shareholder, says that since 2006 Kelly&Partners has used its 'Partner-Owner-Driver' model to complete more than 80 partnerships in total. The group also has partnerships in Hong Kong and India.
“I lead a mission driven, values led, high performance team determined to make our people, clients and communities better off (healthier, wealthier and wiser) through world class professional accounting and taxation services. From a leadership perspective I consider myself a quiet try-hard, someone who relentlessly works at personal and business improvement,” he says.
Since the inception of Kelly&Partners in June 2006 it has compounded its book value at 36.8% per annum against the ASX 300 of 4.6%.
Since its IPO in June 2017, the firm has delivered more than a 9x return and some $330m of value to its shareholders.
One of Kelly’s heroes is the world’s most famous investor, Warren Buffet.
For the last three years Kelly&Partners has staged a shareholder meeting in Buffet’s hometown of Omaha, Nebraska, to coincide with the annual shareholder gathering of the billionaire’s Berkshire Hathaway Group.
The “Kelly gang” of more than 80 investors has gathered at the “Hollywood Candy” lolly shop.
“Warren found a way to use his peculiar talent to make a difference. He has lived his own path with remarkable integrity over more than 50 years leading Berkshire Hathaway. He has found great joy in making a difference to others and that Partnership ethic I have found profoundly motivating,” Kelly says.
In 2022 Kelly&Partners added George Washington University Professor of Law Lawrence Cunningham, the American corporate governance guru best known for collaborating with Buffett in publishing the wisdom of the world’s most famed investor for the past 25 years, to its board.
“Most of us don’t grow up next to someone who has performed at a world class level. It isn’t in our field of vision. Lawrence was sent one of our Quality Shareholders newsletters that I wrote about Kelly&Partners (named after his book Quality Shareholders) and he contacted me to have a zoom. He liked the company and was happy to be a board observer for 6 months and then joined the board on 1 July 2022,” Kelly says.
“Given Lawrence is on the board of Constellation Software and Markel, we are following Warren Buffett’s best advice that ‘It's better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you'll drift in that direction’.”
Kelly&Partners’ Australian business now generates revenue of more than $100m and last year Kelly and his wife moved their family - their children are 19, 17 and 12 - to Malibu in California to spearhead their firm’s US expansion.
He believes the North American opportunity is 15 times the size of the Australian market, given the huge private equity interest and investment in the sector.
Kelly&Partners completed its first US Partnership Agreement in December 2023 and its North American revenues are now around $USD13m (AUD$20m), or 15% of its forward run rate revenue of $AUD140m.
“It took 10 years to achieve this size in Australia. We intend to be USA listed on NYSE by end 2025 and become the Marshall Mclennan/AJ Gallagher of the accounting industry on a global basis building Australia’s Global Accounting Firm,” Kelly says.
“Too many Australian businesses think the future is China. It isn’t, it is America."
There are 60,000 Australians in Los Angeles and not a single Australian accounting firm. We have more support globally than we have ever had in Australia.”
The company is also looking to expand its presence not only in the US, but in the UK, the second of Australia's two largest expat communities.
“Australia has the highest proportion of expatriates in the world of any country. We are seeking to build Australia’s global accounting firm for private business owners that want to go somewhere,” Kelly says.
“To this end we have acquired a 51% interest in the Kudos Network of 60 firms in 48 countries. We will seek to take an equity stake in firms in the largest expatriate markets for Australians to the degree that this is possible over the next decade.”
While Kelly’s cornerstone shareholding in Kelly&Partners will be key in determining whether the group is sold or gets involved in other corporate activity in future years, he has no intention of crystalising the wealth he has built any time soon.
Rather he wants to continue to support the growth of the firm and the Kelly+Partners Scholars Foundation, which has provided scholarships to 46 Students across 11 Schools in Australia to complete a leadership program in at the University of NSW and a study trip to Israel.
“More than 30 years working with leading families of great wisdom and wealth has taught me a great deal about how best to use the resources that you may find yourself with during your lifetime. Our philanthropic focus remains Kelly+Partners Scholars,” he says.
“We hope as we grow our resources, we can do more of this initiative to encourage the next generation of people who want to build businesses that help people.
About the Business
Kelly Partners Group Holdings Limited provides chartered accounting and other professional services to private businesses and high net worth individuals in Australia and internationally. The company operates in two segments, Accounting and Other Services. It provides accounting and taxation, corporate secretarial, outsourced CFO, audit, business structuring, bookkeeping, and other accounting related services; and financial broking, wealth management, investment office, and other non-accounting services. The company was founded in 2006 and is headquartered in North Sydney, Australia.
The Board
• Mr Brett Kelly
• Mr Stephen S. Rouvray
• Ms Ada Wing Tak Poon
• Mr Paul Kuchta
• Mr Ryan MacNamee
• Prof. Lawrence A. Cunningham
This research material has been prepared by Hugh Robertson through independent research facilities and contains an independent view to Morgans Limited.
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