Strength Numbers - accounting firms

California CPA, Oct, 2001 by Sharon Ross

"Firms are trying to become more multidisciplinary," Shamis says. "The $2- to $3-million firms can't compete with the $50-million firms. They don't have the capital. And the best way to do it may be to merge with a larger firm."

Gale Case, CPA, CFE, a principal with Rothstein, Kass & Co., P.C. in Beverly Hills, agrees. Case's firm Ozur Andersen & Radder merged with Rothstein in January 2000.

"It allows the firm to leverage itself more," says Case. "It gives us a capacity to do a greater volume of work. And this is the age of clients wanting one-stop shopping. As a larger firm, it allows us to provide a wider variety of services ranging from financial and investment planning to business consulting, risk management and many aspects of insurance."

While the merger presented Case and his fellow partners a few challenges, including adapting to new management styles and workloads, it brought a few perks. The merged firm now has a presence on both coasts and Case's office can seek work they never would have considered prior to the merger. It boosted the firm's financial services area and provided a more secure environment for retirement, Case says.

Despite all that diversification, CPAs within the firm were able to focus on their specialties while still reaching a broader client base--a feat that's becoming more and more difficult for a sole practitioner in a complex industry.

"What local firms are doing across the nation and across the world are associating with each other. Firms that specialize in estate planning are teaming up with firms that specialize in financial planning ... . So the client gets the full range of services that the client is demanding," Telberg says.

Even a heavy-hitter, like McGladrey & Pullen, LLP saw the benefits of teaming up through its merger with H&R Block. "We're all in the business to form alliances to drive profitability," says Larry Koenig, managing director with RSM McGladrey, Inc. in Riverside. He adds that after the merger, "We were able to go out into markets we hadn't reached before and make our presence known."

And RSM McGladrey gave H&R Block a boost in growing its empire. "RSM McGladrey will be a strong, well-capitalized competitor, and with this solid foundation in place, we will continue to expand our national practice," said Prank L. Salizzoni, then-president and chief executive officer of H&R Block in a June 1999 press release about the merger.

The key to the success of the largest merger to date, was a shared vision, adds Koenig. "Both sides were well-informed. We all knew what the expectations were." Both were aiming to grow their businesses and become industry leaders in accounting, tax and consulting for mid-sized companies.

NEW CHALLENGES, NEW CHOICES

With a merger or consolidation there are challenges, like adapting to new operating models, taking on new responsibilities, adjusting from a partner environment to a corporate environment and maybe a change in focus. When the visions are different, that's when some people may decide to go it alone.