CPA Firms Continue Consolidation in Pandemic

Steve Landsman is a partner in the Encino office of Baker Tilly US LLP. But when the coronavirus pandemic began last spring, he had worked for Squar Milner LLP. The two firms combined on Nov. 1.

Baker Tilly is ranked No. 4 on the Business Journal’s list of Accounting Firms.Consolidation in the accounting industry is being driven by a number of factors.

Gregg Hutchins, a partner in the Westlake Village office of Holthouse Carlin & Van Trigt, No. 2 on the list, said it has to do with succession issues at smaller firms. Tony Rose, chief executive of Rose Snyder & Jacobs in Encino, said it is about bringing in new business. If smaller firms can’t do it on their own, they decide to merge with a larger firm, he said.“These other larger firms have structure and history,” Rose added. “If only 10 percent of their partners are business getters, that is still a lot of business getters. Whereas in a firm of eight partners like us, 10 percent is, what, one partner. That is what is pushing the consolidation.” Landsman pinned it at the firm just wanting to grow.“We wanted to go coast to coast and Baker Tilly did too, “Landsman said. “Our two leading advisory and CPA firms combined to help keep businesses moving.”With the merger of the two firms, Baker Tilly is now the 10th largest accounting practice in the country.

Stuart Fried, director of the EY Center for Careers in Accounting and Information Systems at California State University – Northridge, said that Baker Tilly obviously wanted a presence in Southern California and the easiest way to do that was to acquire a firm as opposed to opening an office and compete in the market for clients. The acquisition brings Squar Milner’s practice with established clients.

“It’s why any company acquires another business, because it expands their reach and they get to spread out their resources,” Fried added. “I would assume that economically it makes sense for them at the corporate level.”  But firms are also growing organically with new hires.Fried said that at CSUN, long noted for its accounting program, there is still active recruiting among seniors ready to graduate. The fall semester was slow, but the accounting firms are all back looking for talent this spring, “They are all coming to our career fairs, they are all presenting to our students and they have all posted their jobs. They are still hiring, even with layoffs, even with furloughs,” Fried said. “They are probably hiring less, though.” Taxing lockdownThe accounting industry in the San Fernando Valley region felt an immediate impact from the pandemic’s lockdown, which arrived just as last year’s tax season was ramping up.

The U.S. Internal Revenue Service later pushed the filing date from the traditional April 15 to July.

Hutchins at Holthouse Carlin & Van Trigt said the firm closed its Westlake Village office in mid-March and for the next six weeks not much work was getting done as people were more focused on their personal health.

“We didn’t know what the pandemic would bring and who would survive and how you are going to adapt,” Hutchins said.

After the first two months, there was a realization in the firm that COVID-19 was just another curveball thrown at it and that people needed to start getting back to work. By the fall, everyone was hitting their stride, Hutchins said.

The firm is much better prepared to handle this year’s tax season, he added.“Even though we are working from home and probably don’t anticipate everyone going back to the office until summer at the earliest, more likely the fall or the beginning of next year, people have adapted,” he explained.

Fried at CSUN noted the pandemic has caused layoffs and furloughs throughout the industry.“There have been delayed promotions, delayed raises, delayed bonuses, salary cuts,” Fried said. “I’ve heard that partners have taken cuts.”Rose at Rose Snyder & Jacobs in Encino said that one of the impacts of the pandemic is an acceleration in the process the process of working remotely.“It certainly has promoted the paperless initiatives, I think, in a lot of firms,” Rose said. “It has accelerated a lot of the movement in the industry, in my opinion.”Rose Snyder & Jacobs landed in the No. 9 spot on the Business Journal’s list of Accounting Firms.

Hutchins said if you were to take a survey of the 700 employees at Holthouse Carlin & Van Trigt, he thinks you would find that most are comfortable working from home and are just as productive as when in the office.

For that reason, “this rollout of the busy season isn’t going to be as nearly as traumatic as what happened last March,” Hutchins said.