Accountancy firm Baker Tilly is enlarging its Scottish presence by merging with the leading independent practice Scott & Paterson. It is the biggest accountancy merger in Scotland since Deloitte's 1999 merger with Edinburgh-based Rutherford Manson Dowds.

The enlarged Baker Tilly group will have a combined turnover of £12m across the central belt, and regional managing partner David Gwilliam says this makes it the biggest non-Big Four firm in Scotland's economic heartland.

He said: "This gives us critical mass in Edinburgh, and brings tremendous opportunities, given Edinburgh is a key financial services market. One significant feature of the deal is that within the Edinburgh context Scott & Paterson is the larger firm."

Gwilliam also welcomed the fact that 10-partner firm Scott & Paterson has a well-established corporate recovery business. Baker Tilly, which itself gained its Scottish presence through its 2002 merger with national firm HLB Kidsons, lost the head of its Scottish corporate recovery in 2004.

Gwilliam added: "There's also a good cultural and people fit."

Douglas Paterson, senior partner at Scott & Paterson, said his firm had received approaches from a number of accountancy firms. However, he said: "None of the others suited our fit."

He said that he and his nine partners were attracted to entering a merger with Baker Tilly because the firm has an autonomous regional management structure. Also, he said Baker Tilly is less heavily weighted towards London and the south-east than its rival mid-tier firms, BDO Stoy Hayward and Grant Thornton.

Scott & Paterson was founded in Edinburgh in the 1850s and has traditionally focused on the east central Scotland market. Talks between the two firms commenced last autumn.

Gwilliam believes the deal's timing is auspicious. He said the Big Four firms are out of favour because of the DTI and FRC-sponsored Oxera report, which highlighted the stranglehold they have over auditing. Gwilliam believes this will make it easier for the enlarged firm to make inroads into the audit market. Baker Tilly already audits the listed groups AG Barr and Anglo Pacific Group in Scotland.

Gwilliam says Baker Tilly is "very much a full-service accountancy and business advisory firm". He added: "We're moving away from being number-crunchers and towards being added-value advisers. Our focus is on audit, tax, corporate finance and corporate recovery." The firm is well represented in the SME, charities and educational sectors.

Scott & Paterson has 10 partners and 60 staff in Edinburgh and currently operates from wholly-owned premises in Bruntsfield Terrace.

Baker Tilly's Edinburgh office is in rented Georgian premises in Queen Street, where it has five partners and 40 staff. It has 110 staff across Scotland. Gwilliam said the combined firm is actively looking for new premises in Edinburgh and has already shortlisted three. "We hope to sign within a month," he said.