The Shareholder Online The alumni magazine of Auburn University’s Raymond J. Harbert College of Business

Auburn alums, accounting professionals weigh in on mergers and acquisitions


One local Birmingham accounting firm was roughly 80 percent tax-driven with a small audit department. A comparable and competing firm was 80 percent audit-driven with a small tax department. What if they joined forces?

That’s exactly what the firms of Sellers, Richardson, Watson, Haley and Dunn, and Donaldson, Holman and West did in 2008. The newly-formed Sellers, Richardson, Holman and West firm (SRHW) was a product of combining the best audit and tax methodologies from each firm.

Allen Dunn

Allen Dunn

“When we combined the two firms, we had better resources on both sides to serve our clients,” explained J. Allen Dunn, II, Managing Partner of SRHW, who earned his BSBA in 1990 and his MAcc in 1992, both from Auburn.

The Reznick Group operated with an overwhelming number of real estate-oriented clients in Boston, Washington, D.C., Atlanta, Charlotte, Chicago, Los Angeles and Sacramento, explained Ken Baggett (BSBA ‘77) and 2005 School of Accountancy Outstanding Alumnus. J.H. Cohn was “much more diverse” in their practice with locations in New York, New Jersey, Los Angeles and San Diego. The firms merged in 2012 to form CohnReznick – the 10th-largest accounting firm in the U.S., a $500 million company with 2,500 employees and 280 partners.

“What was attractive for us is we each had an investment in different areas – the investment of practice and the investment of geography, both expensive to do,” said Baggett, now the CohnReznick Co-CEO, after previously serving as Managing Principal and CEO of Reznick Group. “We were able to parlay off of each other’s investment without a lot of overlap. It’s been a great marriage – better than we could ever imagine.”

Pooling resources, diversification, expanding your business footprint in a competitive market, and succession planning are some of the main reasons why mergers and acquisitions (M/As) continue to consolidate accounting firms – large and small – across the nation.

M/As have their advantages for some, disadvantages for others, and obstacles to overcome to make them work.

‘More expertise’

Gifford, Hillegass & Ingwersen, founded by Dick Ingwersen in 1980, merged with Warren Averett firms in Montgomery, Birmingham and Pensacola, Fla., in 2013. The 1970 Auburn graduate understands the benefits that come with either merging or assuming control of another firm.

“I have even more expertise and can provide more services to clients than I would have been able to otherwise,” said Ingwersen, the 2008 School of Accountancy Outstanding Alumnus. “By in large, every firm that goes through one of these has to go to their clients and assure them that they are going to get the time and personal service that they did previously, and there are going to be more resources and services available. For a client, it’s the best of both worlds. Everybody is getting bigger and more competitive. From a sustainability point of view, we felt like this made a lot of sense. We wanted to compete at the highest level. The merger put us 20 years ahead of what we could have done internally.”


Jason Harpe

Jason Harpe (BSBA ‘93), Partner at Carr, Riggs & Ingram (CRI) in Birmingham, noted that M/As can be advantageous for a smaller firm. He considers mergers the “cornerstone” of his firm’s growth. Why?

“Accounting is a technology-driven business, so sharing resources can be equally appealing for CPA firms of all sizes,” said Harpe, whose firm has gone through more than 20 mergers since its founding in 1997. CRI is now the 23rd-largest CPA firm nationally with more than 1,200 professionals.

“Smaller firms can see significant benefits by merging with a larger firm; tools and resources are also merged leading to operational efficiencies and cost-savings. Additionally, clients may have access to more specialty services, and it’s easier to attract and retain top accounting talent with advanced career opportunities.”

Steve Barrano

Steve Barrano

Growth by establishing greater resources for clients is one thing, but Steve Barranco (BSBA ‘89) believes the successful mergers come from firms with similar visions, cultures, values and qualities.

“It’s very beneficial for the merging firms to have specialties that complement each other,” said Barranco, a Member in Warren Averett’s Healthcare Consulting Division and 2009 School of Accountancy Outstanding Alumnus. “That has been one of the main catalysts behind our mergers. Other reasons to merge include a void in firm leadership or the need for certain specialties or skills.”

Dunn said a M/A isn’t always the best choice for a small firm. “You give up a lot of autonomy if you’re a smaller firm, and you’ve got to convert to the new firm’s systems and processes,” he said. “It can turn your world upside-down if you’re not ready. They’re making a good living doing what they’re doing, they’re happy serving their clients, and they don’t see a big need. They are more nimble. They can make decisions more quickly usually. There are definitely some advantages to being a smaller firm, but you have to decide if those advantages outweigh the issues that come with a merger?”

What makes a good M/A?

Baggett explained that larger firms must study another firm’s characteristics before acquiring.

“Are they profitable? If you’re a smaller firm looking to upstream, you need to be running your business in a very profitable way,” he said. “Nobody wants to take on what I call a ‘Statue of Liberty’ firm — the tired, the poor, the weak. Second, have you really thought through the structure that your ownership needs? Have they gone through some level of change? Any merger or acquisition is going to create change no matter what – could be software, could be people. Accountants do not naturally like change. Think about what we do. We audit history. It’s very predictable.”

Ken Baggett

Ken Baggett

Baggett says, “As a firm leader, you have to have an internal dialogue, ‘I’m probably not going to like some of the changes, but am I going to like the results at the end of the day? Am I going to like what it’s going to become and allow me to do?’ It’s profitability, it’s being able to hang on to your clients longer, it’s being able to hang on to your people longer, because you can offer them more opportunity.”

Ingwersen said he wouldn’t be interested in acquiring a struggling firm.

“That’s not going to make us better,” he added. “We’re interested in firms that have a lot of potential to grow and become part of a bigger and better team. You could pick off some, but why would you want a firm that is struggling and doesn’t have a lot of talent or a good client base? We wouldn’t be accomplishing what we are trying to accomplish.”

Cultures must mesh

Two firms cannot become one overnight. Often, there are different company policies and technology issues to overcome. Barranco, an active member of Warren Averett’s staff recruitment team, understands a few things about bringing in new employees.

“I believe a key to working well with a new firm is to really get to know the people and the culture in the pre-merger stage,” said Barranco, whose original firm of Wilson, Price, Barranco, Blankenship & Billingsley underwent three mergers before settling under the Warren Averett umbrella. “Before our mergers, we spent a great deal of time getting to know each other, in addition to working through the business aspects of the deal, to be absolutely sure it would be a good fit. During this process, it became apparent how the departments would develop and who the new leaders would be. Once we combined, there were no surprises and we have worked very well together since.”

It’s not always that easy. Cultures must mesh. Without naming firms, Barranco discussed a three-way, $200 million merger that wasn’t going to work.

“Two of the three were very similar about people, clients and community,” he said. “They were a very fine firm, but they had different things that were important to them. It just was not going to be a cultural fit. Culture is really about how you operate on a daily basis and what’s important to you. That’s the biggest risk, is that you go in and you think a firm and their partners think like you, but they really don’t.”

It’s also essential to communicate with clients during such changes and keep them at ease.

“Client communications are key to mitigating risks typically associated with accounting firm mergers,” Harpe said. “Retaining clients during change is a foremost priority, and it requires addressing their service team, timetables, and any expected changes—namely focusing on benefits such as enhanced services or information.”

Dick Ingwersen

Dick Ingwersen

Ingwersen agreed. “The clients might get that same feel and say, ‘You’re way too big for me,’” he said. “The pro is that you’re big enough to go after some big clients. You’re able to service more and bigger clients. If you lose some smaller clients, then you’re OK with that to the extent that you put yourself in the game for the bigger clients.”

Could a merger be as, or more, appealing than an acquisition? Yes, Barranco believes.

“I think mergers add the elements of commitment, responsibility and teamwork whereas acquisitions may not,” he explained. “Once a person has been paid for their business in an acquisition, they may not have the same drive to succeed as before. Owners of merged firms have not received a payout, and must therefore find ways to work together and create new successes.”

Consolidation via succession

Not all firm CEOs or partners merge with other firms for geographic, resource, or financial prosperity purposes. What’s going to happen to the firm when you retire? According to a 2012 survey conducted by the AICPA Private Companies Practice Section and Succession Institute, nearly 80 percent of CPA firm owners expect succession to become a “major issue” for their respective firms in the next decade.

“When you’ve got owners of an existing firm and they don’t have the people beneath them to buy them out, they need another firm to come in and do a merger or acquisition so they have a way of retiring,” Dunn explained. “You’ve got the Baby Boomer generation nearing retirement. The M/A route is the succession plan.”

No slowing down

It was announced on June 30 that Big Four firm KPMG acquired Top 100 firm Rothstein Kass, who specialized in auditing hedge funds. The move made KPMG the largest auditor of hedge funds. Also in June, Top 100 firm Kennedy and Coe announced a merger with Matson and Isom, as did Top 100 firm CohnReznick with Ercolini & Co., and Top 100 firm Weisermazars with ICS Consulting Partners.

What does this mean? There’s no slowing down.

“I think the activity in the Top 100 will continue,” Baggett said. “Those deals are still out there and they’re still continuing. Where the activity will be coming from are the firms that started out 15 to 20 years ago, or longer, and have now reached that $15 or $20 million range. They can grow, but they really can’t compete with some of the training, some of the investments, or some of the standard issues you need in the workplace today, especially with the continued regulatory oversight. You’re going to continue to find that Top 100 firms and the second 50 (firms ranked 50 to 100) will continue to merge or be acquired. It would not surprise me in the next 10 years to see more than half of those firms disappear. I’m already talking to four of them.”

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Joe McAdory

Joe McAdory is Communications Editor at The Raymond J. Harbert College of Business. Prior to his appointment at Auburn University in January of 2013, McAdory was Editorial Page Editor (2004 to 2013) and Sports Editor (1999-2003) at the Opelika-Auburn News. He has been recognized by the Alabama Press Association and Alabama Associated Press for his sports columns, news columns, investigative reporting and news features. He is a 1992 graduate of Auburn University.
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