Acquisition Of Beers + Cutler Signals New Chapter In The Metamorphosis Of The Baker Tilly Brand

On Dec. 1, two IPA Top 100 firms became one. No. 17, Baker Tilly Virchow Krause of Madison, Wis. (FY09 net revenue of $207.2 million) acquired No. 43, fellow Baker Tilly USA member Beers + Cutler of Vienna, Va. (FY08 net revenue of $60.8 million). In doing so, Baker Tilly USA (BTUSA) has taken its next big step toward building a national brand – a move that is pulling some member firms closer, driving others away, and leaving some in the middle strategizing to determine what’s next for their firm.

Baker Tilly International (BTI), formerly known as Summit International Associates, Inc., is a network of 145 member firms around the world. In the U.S., BTUSA is an association with member firms who are large, successful, locally dominant and fiercely independent. Over the years, as globalization has increased, large firms have consolidated to compete with the Big Four. BTI, named for the U.K.-based firm that drove the development of the network, recognized the value of a single brand and embarked on a path to develop a common brand worldwide. It’s a strategy that has worked with many members around the world, but the independent regional member firms in BTUSA have been hesitant to fully develop a national brand – in part because of the vicarious liability exposure, and in part because of decades of investment and untold dollars in developing their own local brands and reputations.

Seventeen months ago, all that changed when Virchow Krause & Co. made the announcement that it would take the BT name in the U.S., as the standard-bearer for North America to build the international brand. With the acquisition of B+C, BTVK is expanding its presence in the U.S. in one of the key markets it has deemed strategically vital for positioning itself for the future. For BTI affiliate firms across North America, the theory is, the rising tide that comes with building a national brand should lift all boats, and all BTUSA firms will benefit from the expansion of the brand. For some firms, however, the move signals that what had been a strong association of independent firms might now become the building blocks of something more unified on a national basis.

BTUSA insists that independent member firms are the lifeblood of the association and rejects the premise that a national firm is in the making.

Not everyone embraces this strategy. The roster of firms that have left since the VK&Co. announcement reads like a “Who’s Who” of IPA Top 100 firms: Calgary, Alberta-based Meyers Norris Penny (FY09 net revenue of $280 million); Saginaw, Mich.-based Rehmann (FY08 net revenue of $66.5 million); Katz, Sapper & Miller, Indianapolis (FY08 net revenue of $44.4 million); Miller, Cooper, Chicago; and most recently, New York-based Eisner LLP (FY09 net revenue of $133.2 million).

Skeptics say short of carving up the U.S. into defined regions where each member firm operates, BTUSA member firms will increasingly find themselves competing with each other. Prospective clients looking for alternatives to the Big Four see competing proposals from firms with a common characteristic – the BT name – but few other commonalities. Processes, engagement letters, marketing materials and Web sites are all different. “We can cover you internationally with our BT affiliation” is of no competitive advantage to one BTUSA firm over the other in the same market. Instead, the competing BT name sometimes causes more confusion in the marketplace than comfort. Add to that the bewilderment that comes with – “We are Baker Tilly.” “No, we are Baker Tilly.” – and you understand the root of the mixed message.

While the name “Baker Tilly” has brand recognition around the world, in the U.S. there is little brand awareness. BTVK has thrown down the gauntlet and declared that it will drive that development in the U.S. Consider the statement made in the November 2009 press release about the acquisition of Beers + Cutler: “B+C, based in the Washington, D.C. region, will serve as the firm’s East Coast hub as BT continues its national expansion.” To some observers, “national expansion” inevitably means that firms located in major cities, strategically essential for building a national brand, will ultimately be on the list for potential acquisition.

Tim Christen, CEO of BTVK, insists otherwise. “Let me be perfectly clear. Our strategy is to expand our national reach into Washington, D.C., New York and California, not to build a national firm. We have been up front with all BTUSA firms: we do not intend to expand our firm to other markets,” he tells IPA.

BTUSA member firms need to determine whether they are seeking an international affiliation that they can offer in conjunction with their regionally known independent firm, or whether they are on board with building a national brand – not yet commonly recognized among potential clients in the U.S.

Firms like Eisner have chosen their path, announcing in November that they were leaving BTUSA to join PKF North America. B+C, by joining forces with BTVK, chose the latter. Can BTUSA member firms stay in their current “independent but affiliated” positions without having to build a formal national branding strategy – or more?

“Certainly not in the long run,” says one partner of a former BTUSA member firm, speaking to IPA on the condition of anonymity. “We clearly saw little value in helping [BTVK] build a national brand. Not only would we not take full advantage of the brand, but more importantly we would be competing against it in our local marketplace. We would be paying dues to help strengthen our competition – it was an easy decision for us to find another affiliation.”

Another former member firm partner, also talking on the condition of anonymity, says, “A national brand will never truly develop unless all independent member firms become one firm – with one person in charge, and one way of doing things. There are too many egos sitting in those CEO seats today,” for that to happen, he tells IPA.

Robert Ciaruffoli, CEO of Philadelphia-based ParenteBeard and Chairman of the North American Regional Council for BTI, sees a bright future ahead and fundamentally disagrees with the concern about a national firm being created. Can member firms stay independent members without having to choose the path of Eisner or B+C?

“Absolutely,” Ciaruffoli tells IPA. “BTUSA’s strategy is similar to that of BTI – to have wide coverage of high-quality member firms in cities around North America. As markets continue to grow, firms do compete with each other occasionally. We compete, we refer business to each other and we do joint ventures together – everybody wins.”

Even with the firms that have left, “We still have coverage in all the major markets that we’ve been in, and with some recent mergers, several of the firms have added to their capabilities so the association is even stronger today,” he says.

Ciaruffoli remains very optimistic for the future. He indicates that requests continue to come in from prospective member firms, and fully expects to continue adding new North American members in the future.