CPA Firms Play 'Let's Make a Deal'
Economic slump sparks new investments in innovation and market consolidation. But is there really 'enough business to go around?' And how has your firm handled the recession? E-mail comments to Rick Telberg here.
October 25, 2010
At a pace perhaps not seen since 1999 when the threat of the "Y2K" bug stoked huge technology updates, today's leading accounting firms and finance organizations are overhauling their systems, personnel and strategies in the face of one of the worst economic slumps on record.
Finance organizations are looking hard at new efficiencies to be found in remapping procedures, outsourcing others and in adopting new cloud-based software apps.
Firms, meanwhile, are getting positioned to either emerge stronger from the slump or to enter the mergers-and-acquisitions derby. They have thinned out their rosters and many are reportedly re-hiring. They are investing heavily in technology after taking a hiatus last year. And they are lighting a fire under business development programs.
But it's in the mergers-and-acquisition (M&A) arena that we're already seeing the most visible signs of the predictable consolidation and shake-out that traditionally accompanies economic contractions.
The latest high-profile deals include Larson's takeover of Lemaster Daniels. Long-Island born-and-bred Marcum is going global with a deal to buy L.A.-based Stonefield Josephson, which has a Hong Kong office. In Chicago, Porte Brown is acquiring Ulbrich, which is Porte's fourth takeover in as many years. Cleveland-based SS&G expanding its footprint in the Windy City with Ahlbeck & Co. The much-storied Louisiana firm of LaPorte Sehrt Romig Hand is picking up Houston's Hidalgo Banfill Zlotnick & Kernall. In Jersey City, N.J., Cohen, Doren, Addeo & Co. has joined Fazio, Mannuzza, Roche, Tankel, LaPilusa. In Sacramento, Gallina and Burnett & Co., are hooking up. And the list goes on.
The New York market has been notable, with the number of deals tracking in line or better than the 30 or so per year of the last four years. National firms like CBIZ, Crowe Howarth and Parente Randolph have leveraged acquisitions to gain a foothold. Just this year so far, Amper merged in to Eisner. Weiser first bought Fishbein & Co. and then joined Mazars. Metis bought Rotschild Topal. Graf Repetti bought Zeidman Lackowitz. Grassi bought Soloway Goldstein. And Resnick Druckman Group acquired Gilbert Wolff & Co. and Sigmund Baland. According to RF Resources, an independent executive recruitment and mergers and acquisition agency for CPA firms, the deals so far amount to a combined $1.7 billion in fees.
New York seems to make for particularly inviting mating grounds, according to Robert Fligel of RF Resources. "There is more concentrated potential business here than almost anywhere in the world," Fligel said.
But New York may only be a microcosm for the nation as a whole. "The competition is intense for sure and costs of doing business high," Fligel says. "But I do think there is enough business to go around, especially considering how the world is much smaller. It's not unusual to hear of small or mid-sized firms creating new ventures in India or China as part of their strategy for new business. It doesn't have to be in your backyard."
It takes strong leadership, a talented staff and up-to-date processes to make a firm ready for a deal. But it also takes strong leadership, a talented staff and up-to-date processes to make a firm ready to compete in today's market. So you don't really have a much of a choice, do you?
WHAT DO YOU THINK? How's your firm handling the economic slump? E-mail comments to Rick Telberg here.
Rick Telberg is president and chief executive of Bay Street Group LLC, advisors in marketing, management and strategy.
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