IPA asked several consultants, thought leaders and influential members of the accounting profession their thoughts on the 1991 debut of the Bowman 100. As part of our 30th anniversary celebration, we will be highlighting some of the responses.
Allan Koltin, CEO of Koltin Consulting Group
IPA: What are your initial impressions are when looking at the 1991 Bowman 100? What stands out, what’s of most interest to you, what do you see in that listing that reveals something about where we are today? What was behind the consolidations of the ’90s?
Koltin: What’s most interesting to me when I review this list are the following:
- Over 90% (maybe even 95%) of the Top 100 firms went through a major transformation of which the end result was that they no longer resemble anything remotely to what looked like in 1991. Interestingly, this transformation took place whether the firm merged upstream or remained independent. It is apparent that when it comes to future success, change is inevitable and fortunately for many of these firms, their journey took them to a better place.
- When you look at the firms that remained independent, whether it was geography, product/service line, governance (running more like a business), or partner compensation (Firms are making a lot more money today!), many firms seem to thrive throughout this 25-year period. Local firms became regional firms, regional firms became mega-regional firms, mega-regional firms became national firms and national firms became truly global firms. To some degree, CPA firms rewrote the “record books” when it came to growth.
- What’s also interesting to me is that in 2000, the 100th largest firm was approximately $6 million in revenue and that same firm today trades at over $34 million in revenue. One could say some of this is inflation, but the reality is the last decade has been the single biggest transformation of firms in the history of the profession.
- Another thing that is of interest to me is what I will refer to as “naming rights.” Firms that used to have four or more names in the title reduced to three and then reduced to two and then reduced to one. It wasn’t enough, though, that many firms stopped at one name. Some of the other firms took a different path and instead of reducing from four to three to two to one names, they simple went to letters and today a significant number of firms have a number of letters as their sole name and brand.
- Speaking of names, I also think that branding means much more today than it has ever meant in the past. Accordingly, firms are spending significant dollars on protecting and growing their brand.
- Other things that I found interesting is that having lived through the consolidation phase of 1995 through the present, CBIZ is the last soldier standing. Groups, such as American Express and H&R Block, ultimately sold their interest in the accounting firm space and since that time there have been very few new players entering the profession. What’s mind-boggling to me is that private equity has remained on the sidelines, despite the fact that the accounting profession is well over a $100 billion industry. I sure wouldn’t be surprised to see private equity enter the space over the next decade, but I also thought that there would have been other public companies entering the arena as well, and that hasn’t taken place.
- On a positive side, very few firms have closed their doors because of a bad audit. Outside of Arthur Andersen and maybe one or two others, quality has really held high within the profession. It should be noted that one or two other firms closed their doors, not so much because of quality issues, but simply because they strategically could no longer exist or had overextended themselves financially and were ineffective in essentially running a business. Today, firms seem so much better run and better managed that I would guess we won’t see implosions of firms going forward like some of the ones we’ve seen over the last two decades.
- One final item bears mentioning, which is the merger of equals. For many years, this was viewed as an oxymoron and, in fact, we are seeing great examples today of large firms coming together and doing quite well, such as CohnReznick, EisnerAmper and CliftonLarsonAllen.
If you have any feedback, comments or observations, contact us at firstname.lastname@example.org.
Allan Koltin is the CEO of Koltin Consulting Group. Koltin Consulting Group Inc. is a Chicago-based consulting firm that specializes in working with professional and financial services firms in the areas of practice growth, practice management, human capital, and mergers and acquisitions.