Accounting Mergers Likely as Market Entry, Succession Plan

While there were no large-scale mergers and acquisitions among local accounting firms announced over the past year, smaller transactions continue, and principals of some of the county’s larger firms say that activity is likely to continue for some time to come.

“Companies that want to go into markets where they do not have a presence will take a look at the top 25 firms in the region,” said Monte Kane, principal of Kane & Co., which has four other offices in Florida and one in Las Vegas in addition to its local headquarters.

“Also, accounting firm brokers call us frequently to see whether we are interested in acquiring other firms.”

“Across the industry, there is a significant amount of merger activity or hiring of groups from other firms,” said Blain Heckaman, principal of Kaufman Rossin, which acquired London Witte & Co. two years ago.  The firm has three offices in South Florida.

“It’s driven by a few things,” he said, “Firms want to grow, and in an economy where there is not much growth it’s hard to attain that without new service lines.  If they bring in other groups, they can expand into business valuation or forensics or tech consulting, as the case may be.”

“Miami is recognized as the gateway to Latin America and a financial area,” Mr. Heckaman said, “and super-regional firms looking to expand into the market can do that most quickly through acquisition.”

“For older accountants without a succession plan,” he said, “bringing the firm into another accounting group can be an exit strategy.”

“The tremendous numbers of baby boomers who will retire in the next 10 years is firing this activity both locally and nationally,” Mr. Heckaman said.

“Some of those reaching retirement age can’t retire because of the economic issues of the past few years,” said Tony Argiz, a partner in the  accounting firm Morrison Brown Argiz & Farra, which, after its merger last year with New York-based ERE, is known as MBAF-ERE and has a team of more than 400 across the country in Miami, New York  City, Baltimore, Boca Raton, Boulder, Fort Lauderdale, Orlando, Valhalla and an office in India.

“Many have instead founded accounting firms as sole practitioners. This is a perfect candidate for us.

“They want to get value out of their practice, and if it is strong enough and good enough we can absorb it. This trend is not going to go away; I think there will be a lot of activity in the next five years.”

Mr. Argiz said MBAF-ERE has no immediate plans for further acquisitions on a larger scale.

“We’re concentrating right now on absorbing 130 people in New York and consolidating our systems,” he said. “That doesn’t mean we wouldn’t move into another city if there were another firm that was really strong. Once we’ve completed this consolidation, we will probably look at other areas.”

Changes in the profession and in the law will probably mean more hiring by accounting firms, said Carl Gadinsky, senior tax director at Kane & Co. – but candidates with the experience and knowledge required to advise clients on such complex issues as Offshore Voluntary Disclosure regulations, for example, are in short supply.

“When we advertise, unfortunately nine out of 10 resumes don’t have near the qualification for us to consider them,” he said.

“Accountants are faced with being quarterbacks for their clients’ businesses,” Mr. Kane said. “All the new reporting that is required, the lack of which could mean they get hit with severe penalties, will affect how we advise not only individuals but corporations.”