Dunbar Cook deal an omen of more accounting mergers

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The 40-year-old accounting firm Dunbar Cook & Shepard was snapped up by a Cincinnati firm this month, and you can bet your top and bottom lines it won’t be the last such deal.

Accountants point to aging partners at firms who are looking to retire, more complex regulations and an attractive local business climate as reasons out-of-town accounting firms are looking this way.

The upside is that many of these acquirers are larger and have more capabilities to offer an acquired accounting firm’s clients. They also present professional opportunities for accountants at the acquired firms.

At times, “we would have to outsource [work] to other firms,” said Micki Siner, a CPA and managing partner at the former DCS. One of those firms it used to work with was the firm that bought DCS for an undisclosed price: Cincinnati-based VonLehman & Co.

The two firms have worked together for 20 years on various projects.

“This is like marrying your best friend,” said Brian Malthouse, president of the 110-employee VonLehman.

One of the Ohio firm’s specialties, for example, is a corporate turnaround group that rips apart a client’s books and practices to help right the ship.

“It’s difficult sometimes for firms to get enough critical mass to compete. You don’t have this piece or that piece,” observed Patrick Early, president of Somerset CPAs, one of the city’s largest accounting firms.

Siner said the sale of the firm provides more opportunities for DCS employees. It also was a way to ensure that partners of the firm nearing retirement could cash out their stake.

Partners of accounting firms often rely not on a traditional retirement plan, but on the value of their stake in the firm. Payouts are based on such factors as years worked and average annual salary.

Baby boomers who underlie these firms are at or near retirement age.

“They look around and say, ‘Who’s going to buy me out?’” said Tom Sponsel, managing partner of Sponsel CPA Group.

But an accounting firm has to be growing to generate the income to make such payouts, Early said. For many firms, he observed: “If you don’t continue to grow and fill the bench, it’s difficult to make those retirement payouts.”

The American Institute of CPAs conducted a survey last year that found nearly 80 percent of CPA firm owners expected succession planning to become a major issue for them over the next decade.

Nearly half of all U.S. accounting firms were in merger talks already or expected to be within two years, according to the group’s survey.

“Every once in a while, we get nibbles from someone” who wants to be purchased, said Carol Howard, tax director at R.J. Pile & Co. in Indianapolis.

She said the 75-year-old R.J. Pile has had decent growth in recent years. While it hasn’t acquired a firm lately, it opened a Noblesville office last fall.

Somerset also doesn’t intend to be left behind.

Last July, Early’s firm acquired Meridian CPAs, which had a strong specialty in the health industry. The acquired firm wasn’t dealing with partner buyout issues, but wanted to be freed from some of the administrative headaches of running a firm.

Meanwhile, some of the accounting firms that have been busy snapping up other accounting firms have ambitious growth plans. VonLehman, which also has offices in Kentucky, plans to double in size over the next four years. That could bring a corresponding growth in its new Indianapolis office to 45 people.

“We have pretty aggressive growth plans,” Malthouse said.

The influx of such larger, regional accounting firms is reminiscent of the invasion of larger out-of-state banks here in the 1980s and 1990s. Even still, many smaller, local banks found opportunities to capitalize on the chaos that ensued.

Many banking customers suddenly had to wait on decisions being made back in the bank’s corporate office, in Ohio.

“We are very embedded in the community. … We can be close to our clients. We can make decisions quickly” and locally, Sponsel said.

It appears to be working, with “very good” growth in the last two years.

Other accounting firm mergers here in recent years include the sale of Ent Imler CPA to Aurora, Ill.-based based Sikich LLP, in 2011.


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