MERGERS & ACQUISITIONS
What’s Shaking Small Firm M&A? Small accounting practices have their work cut out for them in today’s mergers and acquisitions environment. BY BRIDGET MCCREA
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hen New York-based accounting firm Mitchell & Titus finalized a deal to purchase Chicago-based Washington, Pittman & McKeever in July, it closed the final chapter of a long-time plan of managing partner and former Chicago Federal Reserve Chairman Lester McKeever, Jr. “There had been talk around here for many years over the issue of merging,” says McKeever, 84. “I spoke to all of the local CPA firms — particularly minority-owned firms — to see if we could come together to create the scale necessary for a firm to offer all of the different services that the large firms could offer in order to support our growth.” As it turned out, McKeever knew the perfect suitor for decades, but protecting the legacy of Washington, Pittman & McKeever was crucial; the firm was founded nearly eight decades ago by Mary T. Washington Wylie, the first African American woman to become a CPA. Around the time McKeever was rallying the troops in favor of a large, merged, minority-owned accounting firm, he renewed a conversation with Mitchell & Titus founder Bert Mitchell that took place some 25 years ago about combining the firms. “That was the kind of firm we all aspired to — a larger, minority-owned firm with multiple offices,” says McKeever, reflecting on Mitchell & Titus, which is the largest minority-controlled firm today. “It’s an aspirational dream that has come true for me [the merger], particularly because this is geared toward African American business development; it was a natural fit.” McKeever is no stranger to the challenges of running a small accounting firm in today’s increasingly competitive and complex 14
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marketplace. If anything, he empathizes with small firm owners. “It’s almost impossible to keep up with everything,” McKeever says. “It takes a broader-based organization to cover all of the different areas that must be addressed in order to survive, sustain, and grow.” Looking at the accounting landscape right now, McKeever says every smaller firm is going to have to start thinking like this, particularly if M&A is to be the backbone for future success or succession planning. “Some firms are waiting until it’s too late and wind up with nothing of value to sell. It’s not easy to find a successful firm that will pick you up,” McKeever warns. “If the right opportunity comes along, I always encourage small firms to take advantage of it. It’s not just about sustaining growth; it’s about protecting your hard work and seeing it survive and sustain over time.”
TIME CHANGES EVERYTHING There was a time when small CPA firms (less than $3 million in revenues) were hot commodities. That sentiment has changed over the past couple of years as acquirers have become more interested in firms that have an advisory, consulting, tax planning, or specialty service/industry focus, explains Allan Koltin, CPA, CGMA, CEO of Koltin Consulting Group in Chicago. Koltin has been called “accounting’s busiest matchmaker” by Crain’s, so perhaps it’s wise to heed his words. “Large firms aren’t as interested in small firms because they see them as ‘stale goods,’” Koltin says, pointing to firms focused heavily on compliance work that must undergo transformations to catch up with the increasing use of automation, artificial intelligence,