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CPA Mergers & Acquisitions



CPA Firms Seek Compatible Partners


Through mergers and acquisitions, South Florida accounting and advisory firms are growing and enhancing their services to clients, including the region’s attorneys. But choosing a new partner is as much a matter of compatibility as the financial numbers, according to several managing partners interviewed by South Florida Legal Guide



In January, Miami-based Morrison, Brown, Argiz & Farra, LLC (MBAF) acquired ERE, LLP, a New York-based accounting and consulting firm, creating one of the 40 largest U.S. accounting and consulting firms with more than $85 million in annual revenue. “ERE’s talented and skilled team of professionals ideally complements our core practices and corporate culture,” said Tony Argiz, CEO and managing partner. “By forming one of the most knowledgeable and trusted team of professionals in our industry, we are poised for a bright future as a larger, stronger firm.”

The same could be said for Marcum LLP, which in 2009 combined forces with Rachlin LLP (formerly Rachlin Cohen & Holtz), first as MarcumRachlin, a division of Marcum LLP, and now as Marcum LLP. “Consolidation has been a trend for many years, and there are a lot fewer firms today than there were a decade ago,” said Gary Gross, Florida region partner-in-charge. With 24 offices from New England and California to Florida, as well as overseas, Marcum was recently ranked the 14th largest in the U.S. by Accounting Today. In Florida, Marcum has offices in Miami, Fort Lauderdale, West Palm Beach and Orlando.

Another example is Goldstein Schechter Koch, P.A. (GSK), a full-service Coral- Gables-based accounting, tax, audit, and consulting firm. In January, GSK merged with Hollywood-based Jeffrey Kramer, CPA. “Jeff has a great deal of expertise in healthcare and public companies, strengthening our team,” said Howard Lucas, partner/CEO of the South Florida firm, which has $17 million in revenue. “He also has a very entrepreneurial attitude, which blends in with our group. The merger was a good match of personalities and talents.” GSK has now more than 100 professionals
serving businesses, non-profit organizations and individuals, and is associated worldwide with the BDO Seidman Alliance.

A Positive for Attorneys

For South Florida attorneys, an accounting firm merger or acquisition can open the door to new or expanded litigation support services, according to Argiz. “The trend can be a real positive for attorneys since more firms will have greater depth in different fields and industry niches,” he said. “For instance, there can be better expert witness support on the litigation side.”

Argiz notes that MBAF has a long history in serving clients in the auto industry, including car dealerships, as well as community banks, international banks, broker-dealers and technology companies. “We are also very strong in South Florida’s Hispanic market,” he added. Both MBAF and ERE have extensive experience in the international tax area, as well as serving nonprofit
clients.

“The combination of South Florida and New York professionals makes our team much stronger,” said Argiz. “We’ll be adding more people in litigation support, especially in New York, to enhance our services.”

Altogether, MBAF has more than 400 staff members with offices in Miami, New York, Baltimore, Boca Raton, Boulder, Chicago, Fort Lauderdale, Orlando, Valhalla and India.

In Florida, Marcum is building on Rachlin’s large litigation practice, including extensive work in bankruptcies and all types of commercial litigation. At the same time, the firm can now bring in specialized expertise from New York if needed, Gross said. “Our New York offices have a large hedge fund and private equity practice,” he said. “That has not been a big part of the South Florida financial market, but it certainly adds to our capabilities. We find it’s an advantage to have partners with these skills — it’s not like bringing in someone from
outside the firm.”

For example, Marcum had an opportunity to be the lead forensic accountant in a large complicated case that involved insurance companies, Gross added. “We brought in one of our New York partners with the expertise needed to handle that kind of case,” he said. “At the same time, we are also helping our California offices build a municipal accounting practice. That’s an example of how we can ‘export’ our experience.”

For GSK, acquiring the Kramer firm brought additional capabilities to its litigation support department, which primarily handles matrimonial, probate and commercial litigation matters, such as lost profits. “Jeff has the credentials and knowledge to be an expert in many types of matters,” Lucas said. “Since every case is different, a good litigation support person can take an objective look at the numbers, helping attorneys reach fair and equitable settlements.”


Culture a Key Issue

Addressing cultural issues is one of the keys to a successful merger or acquisition. “Make sure culture is addressed early in the process,” said Joel Sinkin and Terrence Putney in a 2009 article in the Journal of Accountancy. “Employees transition best when their original work environment is maintained to the extent possible to accommodate existing policies and other operational features.”

Other cultural issues that come into play when firms merge their operations include:

  • Client service. Some firms try to “spoil” their key clients by providing extra services and support, fostering long-term relationships. Others focus their services on a project-by-project basis.
  • Formality. Dress codes, schedules and office hours can vary from firm to firm. However, those differences can be greater in places like New York or Chicago since South Florida has a relatively casual business climate.
  • New business development. Some firms rely on a “rainmaker” while others expect all partners and associates to bring in new clients.
  • Support staff. In some firms, support staff may be a visible part of a client team, while in others they function behind the scenes.


Of course, there are many other factors that affect the success of a merger or acquisition, including common goals and values. In addition, the combined firms may be able to operate more efficiently, reduce overhead costs and take advantage of the other economic benefits.

A Continuing Trend

Mergers and acquisitions of CPA firms have been continuing trend across the U.S. over the last three years. In 2009, for example, Chicago-based Baker Tilly Virchow Krause, LLP acquired Beers + Cutler in Virginia — a deal that combined Midwest and Mid-Atlantic firms. In Pennsylvania, Parente Randolph, LLC (Philadelphia) merged with Beard Miller, LLP (Reading) to form ParenteBeard, LLC, now the largest state’s largest accounting firm.

Other mergers took place in the Midwest, Northeast and Southeast in 2010 and early 2011, as firms sought to expand their geographic coverage and access new markets. That was certainly the objective for MBAF. “We were looking to strategically expand and found a mutually beneficial opportunity with ERE,” said Argiz. “By joining forces, we were able to strengthen our high level of commitment to client service across multiple markets and industries.”

Noting that New York has the largest concentration of large accounting firms in the world, Argiz added, “As a Miami firm that now has a strong presence in New York, we have a great deal of expertise and services we can offer to a number of niche markets.”

Lucas points to succession planning as another major reason behind the nationwide acceleration of mergers and acquisition. “In many firms the partners are aging Baby Boomers,” he said. “They are starting to think about exit strategies, and often mergers can be part of that process. Bringing in younger partners can help keep the firm going on a long-term basis.”

Gross points out that it can be difficult for a mid-size CPA firm to succeed in the market, faced with competition from smaller, niche firms and large global players. “Joining forces with another firm can provide advantages of scale, and give you a stronger client-service platform,” he said. “It creates more opportunities for the people at the firm as well as for attorneys and other clients. We will definitely see more mergers in the future.”


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