12 ParenteBeard partners find 'better fit' with BDO USA
The recent departure of 12 partners and nearly 100 other employees doesn't mean bigger trouble is in store for Philadelphia-based ParenteBeard LLC.
In fact, both a former partner now with BDO USA LLP — the national firm out of Chicago that landed those financial professionals — and the regional accounting practice he left said the group split was amicable and offers better growth potential for both companies.
Accounting professionals and industry consultants saw the migration as just another cog in the wheel of national consolidation and, quite possibly, as a lingering effect of the 2009 merger between Beard Miller Co. and Parente Randolph, which became ParenteBeard.
"It happens. When you're dealing with two organizations as large as Parente (Randolph) and Beard Miller were, not everyone is going to feel like that was the best thing for them," said Terrence Putney, CEO of New York-based Transition Advisors LLC, an expert in succession planning and merger and acquisition strategies for the accounting profession.
It's common for the newly created firm to lose partners and support staff in the wake of change, he said.
"It's just one of the things that happens with big-enough mergers like this. They didn't get out of it what they wanted," Putney said.
Terry Lehman, one of four former ParenteBeard partners to move over to BDO in Harrisburg, was with Beard Miller before retiring in 2009. He came back and joined ParenteBeard in 2011.
Through the years, there was dialogue with BDO, but nothing really came of it, he said. Beard Miller had been an alliance practice before the merger, meaning it was part of a nationwide association of independent firms that share professional resources.
"I think this spring, as BDO talked expansion, (the partners) felt this might make a lot of sense for individual partner growth and an opportunity for the (banking) practice," Lehman said.
BDO has been aggressively expanding its territory, including additions in Alaska and Minnesota, along with this Northeast growth and internal promotions. The company has added about 40 partners during the last few weeks, said spokesman Jerry Walsh.
"From our perspective, we felt that it was a better fit for us with BDO to grow," Lehman said. "It is the same firm, just with more far-reaching resources."
The other local partners are Keith Cenekofsky, Joseph LaClair and Steven Masterson.
The Harrisburg office had about 30 people under ParenteBeard. The majority of those employees came over to BDO, Lehman said. The goal is to grow the practice to about 65 people, which was the staffing level under Beard Miller.
"It's not going to happen overnight, but we fully expect it to grow," Lehman said, adding that it will be a full-service office. "We do expect to grow in the banking and commercial practices."
Commitment to growth
ParenteBeard spokeswoman Amber Mallon said that the relationship between the firms is one of mutual respect and that there was a high level of professionalism during the negotiation. However, terms of their agreement remain confidential.
Lehman said the partners can solicit about 200 banking clients and about 200 others who were served by them at ParenteBeard. ParenteBeard declined to elaborate, citing the agreement. Walsh also had no comment.
Most firms would have nonsolicitation restrictions on partners, Putney said.
"ParenteBeard is fully committed to the growth of our financial institutions practice and the Central PA region," Mallon said. "In accordance with our strategic plan, we are aggressively pursuing company growth both organically as well as through mergers and acquisitions."
She would not speak about specific geographic areas or new services the company is interested in.
The company's chief executive, Robert Ciaruffoli, said in a story on Philly.com that the company had "made strategic decisions to part ways with practices that were not aligned with our strategic plan."
Meg Kane, another company spokeswoman, said that comment was not about the banking and financial institutions practice, which ParenteBeard views as "important to its long-term vision."
The firm currently has 19 offices, 113 partners and more than 1,000 employees. It will remain actively engaged in serving Harrisburg and its surrounding regions, Kane said.
"I think the trend is there, not just in accounting but legal and financial, from a consolidation standpoint," said Bradley Newman, a certified financial planner with Harrisburg-based investment management firm Roof Advisory Group Inc. "That is certainly driven by the benefit of economies of scale. In all three industries, there is more pressure for growth. (And) growth by acquisition is certainly faster."
Central Pennsylvania and Harrisburg, in particular, would not be a natural progression for most large national accounting firms looking to grow office locations, said Ed Monborne, CEO of Manheim Township-based Reinsel Kuntz Lesher LLP.
"It's not cost-effective for them," he said of competition from local and regional firms. "It's easier to send people to the area to work on much larger jobs for multinational companies."
Those that are here do business in the area primarily because of the large state and federal government presence, industry professionals said. And there are a few large international companies, said Charles Kern, CEO of Camp Hill-based Kern and Co. PC, citing The Hershey Co. and Harsco Corp.
Merging with a local firm is the most likely scenario in smaller markets because they already have "boots on the ground," Monborne said.
And most of that consolidation activity likely is being driven by the lack of succession planning, Monborne said.
"There are a lot of smaller firms where the partners are north of 55 years old and the plan is to merge or be acquired," he said.
The wrong cultural fit also drives partner migrations, he said, along with changes in strategic vision.
With a Lancaster County addition later this month, RKL will have 10 partners who previously worked for ParenteBeard, he said.
"There are only so many public accounting firms," Monborne said of the local area. "And we're not immune to any of this. The lifestyle is crazy."
Monborne said it's been a few years since he has fielded any inquiries about a consolidation.
RKL has appeal because of its commitment to the local communities and a culture of local decision-making processes, he said: "My guess is the phone call will come from other firms looking to be in the area, but we have no interest in an upward merger."
More about BDO deal
The ParenteBeard deal with BDO USA LLP, which helped the former grow by 12 partners and 97 other employees, took effect July 1.
BDO has assumed ParenteBeard’s Harrisburg office. It has four former ParenteBeard partners and about 30 employees. BDO also opened an office in Reading.
The other former ParenteBeard partners and employees have joined BDO offices in Philadelphia; New York; Long Island; Wilmington, Del.; and Woodbridge, N.J., according to BDO.
“Through the addition of these professionals, we are adding premier banking sector resources to BDO’s existing financial institutions industry practice in the Mid-Atlantic and Northeast regions,” said Wayne Berson, BDO’s CEO.
The firm has 49 offices, 325 partners and about 3,500 employees.