Strength in Number Crunchers

Will an alliance among a handful of midsize accounting firms gain ground?
Laura DeMarsDecember 29, 2006

Accounting firms unite! A group of midsize firms is forging a formal alliance in an attempt to offer an alternative to the Big Four.

In October, 22 accounting firms announced they will conduct business under the name Baker Tilly USA, a wholly-owned subsidiary of UK-based Baker Tilly International, to try to gain scale in an industry dominated by the Big Four and a handful of second-tier firms. Under the agreement, the alliance, which until now had collaborated under a loose affiliation, will use the Baker Tilly name to solicit business from larger clients. Varying member companies will be brought on board according to a client’s needs, and revenues will be divided among those companies involved based on the percentage of work each handles, says Bob Ciaruffoli, chairman of Baker Tilly USA and CEO of member firm Parente Randolph.

“We’re working together to attract those companies that we can’t handle independently,” says Ciaruffoli. “The alliance enables us to more effectively serve clients by strengthening our capabilities in Sarbox compliance, auditing, and tax services.”

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The idea isn’t new. BDO Seidman formed an alliance in 1993 that now has 198 member firms. Tom Riley, a principal at TFG CPAs and a member of that alliance, says it enables smaller firms to be competitive by giving them access to services they would otherwise be unable to provide. “It has allowed us to provide customers with quicker answers,” he says.

Three other groups — Moores Rowland International, The Leading Edge Alliance, and Moore Stephens North America — could announce plans within a year to create formal alliances from the informal networks they have built. Together with Baker Tilly USA, they would represent about two-thirds of the nation’s top 100 accounting firms, says Allan D. Koltin, CEO of PDI Global Inc., a marketing consultancy for accounting firms.

Koltin thinks the alliances could gain ground among midsize firms while Big Four firms remain tied up with Sarbox work. “There is a call for more firms with worldwide resources,” he says.

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