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For the past several years, local and regional accounting firms across the state have been forming alliances to compete on a wider playing field and produce results for their clients that may not have happened otherwise. These alliances can range from the simple to complex, from a joint venture with another firm to an alliance with a national accounting association, such as BDO Seidman or the RSM McGladrey Network. Sometimes they combine both to provide a greater depth of resources that can include international tax expertise, professional training, marketing resources, or technology updates.

As consultant Troy Waugh, CEO of Nashville’s Waugh & Co., says, “I have found the very best firms in most markets are affiliated with international alliances in order to serve their clients’ growing demands.” He adds that partnering can help firms overcome a lack of skills and capital.

Allan Koltin, president and CEO of Chicago-based consulting firm PDI Global, believes such affiliations are becoming more prevalent. “The reason for this trend is two-fold. One, as the Big Five have become the Big Four, these larger firms are eliminating many of their privately held clients, primarily in the middle market, and this has opened up a great opportunity for local and regional accounting firms. Second, due to the restraints of Sarbanes-Oxley whereby Big Four accounting firms can only do the audit of public companies, many consulting and special project opportunities have now been created that local and regional accounting firms can take advantage of,” he says.

However, Marc Rosenberg, president of consulting firm The Rosenberg Associates, also in Chicago, cautions it is important to keep perspective in the area of affiliations. “Well under 1% of all firms have such an affiliation. I wouldn’t say it is a common trend in the industry, though the BDO network seems to have grown steadily during the past five years in particular,” he says.

Kenneth McCall, a consultant with Boomer Consulting in Manhattan, Kan., maintains that although alliances might not be a common trend, they are a growing one. “As firms attempt to move beyond commoditized services, the ability to partner and affiliate with a firm of greater resources, or particular expertise, becomes a way to provide new and better services to clients,” he says.

Perhaps the most prevalent reason many local and regional accounting firms have joined affiliations stems from the need to provide clients with solutions that rely on global expertise. Bill Elliott, a domestic and international tax partner with Chattanooga-based Joseph Decosimo & Co., says that his firm’s recent alliance with New York-based Marks Paneth & Shron is similar to a joint venture/one-on-one strategic alliance. Together, they have created MP&S Decosimo Global, which provides international tax planning and consulting. Yet they also have a worldwide affiliation with the Moore Stephens Global Alliance.

Elliott explains how Decosimo’s relationship with Marks Paneth & Shron has been beneficial from an international standpoint. “We have combined our resources to provide a European Union market penetration structure for one of DeBeers Diamonds’ largest seat holders,” he explains. “This includes establishing a tax-efficient holding company structure residing in the United Kingdom, owning an operating subsidiary in Antwerp, Belgium, with an intermediate holding company for the manufacture of jewelry in Mauritius for access to India, China and Thailand.”

The international advantage of alliances was also a draw for Crowe Chizek and Co. Although the firm has offices in seven other states besides its Knoxville and Brentwood locations, it is a member of Horwath International. “For example, a client in rural West Tennessee has three corporations operating in Mexico. Knowing the tax code and business laws alone in that jurisdiction is sometimes not enough,” says Dickie L. Heathcott, an executive from Crowe Chizek’s Brentwood office. “The Horwath network allows us to effectively respond to this client’s needs because we have a member firm in Mexico familiar with the political landscape, the local culture, and how to comply with the tax laws.” Heathcott explains that through the alliance his company can better serve its clients and compete effectively in such an environment. “Even in our Tennessee offices, one doesn’t have to look far to see the effects of globalization,” he says.

Vic Alexander, chief manager of KraftCPAs in Nashville, also points to the establishing of client access to world-class resources as one of the reasons his firm allied with the RSM McGladrey Network. “Having Network affiliates in other states and other countries is a benefit when we’re working with clients who have multi-state or international locations,” Alexander says. “In the event that we need to observe inventory in another state, for example, we can rely on our Network affiliates to assist us and know that they are adhering to the same standards of quality control that we use in our firm.”

In addition to international contacts, many firms believe having an additional depth of resources is critical to growing their client base. It is the main reason why Memphis-based Rhea & Ivy is a part of the Moore Stephens North America Alliance. “We have been able to propose on and win engagements we would not have been able to without this valuable affiliation,” says Anthony Clark, chief manager. Clark mentions several areas of mutual benefit in the alliance, including experts’ assistance with proposal opportunities and engagements, administrative and technology resources, and human resource issues.

Finding value in affiliating is why Lattimore, Black, Morgan & Cain, with offices in Nashville, Memphis and Knoxville, was one of three founding members of the Leading Edge Alliance, along with two firms in Cleveland and Boston. Managing partner R. Michael Cain says they discovered a need in the accounting market for an organization to share best practices and general needs that arise in larger regional firms. “It has exposed us to a variety of firms across the United States and abroad. Our work with public companies can take us outside the state. In situations where it has made more sense for the client to utilize a firm in another part of the U.S., we have done so with the assistance of the Leading Edge Alliance group of firms,” Cain says.

Another motive for some firms to throw their hats in the alliance ring centers on providing clients with specialized niche expertise. Jeni Beth Vincent, marketing director of Alexander Thompson Arnold PLLC in Union City, says her firm became a member of the BDO Seidman Alliance to expand its tax and financial services. “In addition, we determined that the alliance would be beneficial in providing the expertise necessary to serve larger clients who had the need for more specialized accounting and auditing services,” Vincent says. It’s an alliance that works both ways, as the firm also has developed certain niches that are valuable to BDO Seidman. “They have referred engagements to us where we had expertise in areas their local office did not have. We have referred clients to them and received referrals from them, and we have used their resources to help with technical issues,” Vincent says.

Rosenberg states helping to secure larger clients is a major motive for joining an alliance such as BDO Seidman. “Local firms with a strong presence in their local market find it useful to tell their market of their ‘affiliation’ with BDO to create the feeling that they are sort of a national firm, which can be very helpful at landing very large clients that, for the most part, always seek to hire a national CPA firm. Some BDO network firms, in the process of making their sales pitch to a prospective large client, will actually fly in a BDO partner to participate in the pitch.”

Roderfer Moss & Co., based in East Tennessee, is also a member of the BDO Seidman Alliance. CEO Jimmy Roderfer describes the alliance as a network of firms that are very serious about helping each other. “They help us with marketing and recruiting ideas as well as sending us a steady stream of technical updates.” For Roderfer, the training resources provided by the alliance are advantageous. “We established the position of marketing director in our firm last year,” he explains. “In a nutshell, the marketing directors of a handful of Southeast firms essentially trained the person we hired and helped her with the fine points of marketing an accounting firm. They still collaborate today, making it much like one huge marketing department. It’s hard to put a dollar value on that, but it’s high.”

Ongoing professional training is a potentially burdensome area that an alliance can help a firm to control. At KraftCPAs, Alexander says that its affiliation enhances the firm’s training programs and workflow processes. “Continuing professional education is vital to the success of our people and our firm, but developing training programs from scratch is time-intensive and expensive. We’re able to rely on the McGladrey Network for much of the technical training and management training that our people receive,” he says.

With such an abundance of benefits, it’s hard to see any downside to having an alliance, but there is one. According to Rosenberg, “Like any relationship in which someone is purchasing professional services, the risk is that you will pay a lot of money and feel you didn’t get much in return. BDO is a bit expensive. Firms that aren’t prepared to be proactive in making the relationship work will feel they are paying a lot of money for nothing.”

Overall, however, the relationships cultivated through alliances tend to be successful. “It gives firms of all sizes the opportunity to learn and grow from each other’s experiences,” McCall says. “It allows firms to take advantage of resources that might not otherwise be available to them, while allowing larger firms to leverage their investments in specialized assets. As long as expectations are clear from the outset, and the duties and responsibilities of each party are agreed upon, it’s hard to see a downside from this kind of collaboration.”

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