Those CPA Firm Nuptials Just Keep Coming!

Having covered the public accounting arena for nearly a dozen years, I was fairly certain I had developed a keen ability to monitor the pulse of the profession. More often than not I was proactive regarding many of the big headline stories, but just to keep me honest, every so often a blockbuster event would blindside me.

Much like on Tuesday, when super-regional firms J.H. Cohn and Reznick Group announced that they planned to merge in September, thus creating the 11^th largest firm in the country with 25 offices, 2,000 employees and revenues exceeding $450 million.

Having been on the front lines of reporting during other mega-mergers like LarsonAllen and Clifton Gunderson in the Midwest, Dixon Hughes-Goodman in the Southeast and New York’s Marcum buying just about everyone, everywhere.

 By my estimate, since October, there have been nearly 100 M&A deals in the profession – and those are just the ones we heard about. Dozens more undoubtedly fell under the radar.

In fact, more than 50 percent of the Top 100 firms in the U.S. reported completing at least one merger in 2011.

Now that I’ve stepped away from my editorial duties and migrated to the transition and succession services business, even I’m nonplussed at the rate of M&A activity that began gaining traction in 2009 and has only accelerated since then both in size and scope.

After all, there are only a finite number of super-regional firms to go around. After that it begins drilling down.

Coincidentally, I had hosted a pair of webinars this past week focusing on the trends and events that impact the accounting profession and was asked by an attendee where I thought we would see the most M&A activity this year and next in terms of firm size. I was even asked could there be a chance of any unions among the Big Four, thereby making it the Big Three.

My simple answer to that would be “no.” 

Any reduction in the amount of global auditing firms I believe would raise serious competitive issues and could well prompt federal intervention. If my background has taught me anything it’s that the folks on Capitol Hill love to get involved in accounting and auditing issues.

But  where I think you’ll see the most activity will be among the 2-5 partner firms, who are facing competitive pressures from both smaller firms (who can undercut them with regard to engagement fees) and from larger practices imbued with greater resources in terms of personnel, technologies and geographic market reach. There are hundreds of firms of that capacity now facing the unpleasant quinella of torrid competition and a lack of a formal succession plan.

Just my humble opinion.

That is until the next mega-merger catches me off guard.