BKD CPAs & Advisors and Dixon Hughes Goodman, two Top 20 Firms, are merging to form a $1.4 billion firm that would vault them into the Top 10 in the U.S., with further plans for a national growth strategy.
The two firms announced their plans to join forces Thursday. BKD, formerly known as Baird, Kurtz & Dobson, is based in Springfield, Missouri, and ranked No. 14 on Accounting Today’s 2021 list of the Top 100 Firms. It recently reported $758.12 million in annual revenue for the fiscal year ending May 30, 2021. The firm has approximately 3,300 employees, including 296 partners, and 41 offices in the U.S.
DHG, based in Charlotte, North Carolina, ranked No. 17 on Accounting Today’s 2021 list of the Top 100 Firms. It recently reported $504 million in annual revenue for the fiscal year ending May 31. DHG has approximately 2,100 employees in 13 states, including 207 partners, and 27 offices in the U.S. The combined firm will have more than 5,400 team members across 68 offices in 27 states, plus the United Kingdom and the Cayman Islands.
The two firms plan to rename the combined firm, but the new name won’t be announced until a future date. The deal is expected to close in the second quarter of the year. Financial terms were not disclosed.
The firms see the combination as a way to expand their advisory services and industry focus, and provide better career opportunities to staff while establishing a stronger national presence and a path to global expansion. They will set up 10 national industry practices.
BKD CEO Tom Watson will become the CEO of the new organization, while DHG CEO Matt Snow will be the chair. The two had been in talks for several years, but the discussions heated up about 10 months ago.
“It was probably the culmination of years of discussion about the evolution of the industry and our client base and how those were changing,” Watson told Accounting Today. “About 10 months ago, Matt and I started comparing notes about each firm’s long-term strategic goals, and both of those included becoming a truly national firm, primarily because we’re seeing our clients ask us for that. They’re consolidating, they’re getting bigger, they’re in more locations than ever. So they would ask, ‘Are you able to grow with us and continue to serve our needs?’ As we looked at what it would take for both of us to be able to do that, we quickly figured out that this was the right time for us to come together and advance the ball on a lot of our strategic goals.
"In addition, we get a lot of questions from our professionals about wanting to continue to grow their career," he continued. "As we looked at it, we thought not only would this be good for our clients, but we felt like it would be really good for our people. We’ll have more industries for them to specialize in. We’ll have more offices where they can have enhanced career mobility opportunities. We think it will create a lot of opportunities for enhanced learning and professional development for them as well.”
The merger will also enable both firms to expand their footprint nationally and perhaps internationally.
“The geographic component of this was important for both firms, and it’s part of our growth strategy for both our firm and for BKD,” said Snow. “We want to be national, which means coast to coast, and we also want to have the ability to potentially go global too. That’s also a part of expanding in that way as well. If you look at our footprint, we are very complementary. We have 68 markets between the two of us with our new firm, and only three are overlapping. That really gives both firms and a combined firm a really strong reach throughout the country. That was one of our objectives as a part of this. As Tom said, our clients are asking us, ‘Are you where we need you to be?’ This allows us to answer that question very positively and affirmatively.”
The merger will also allow both firms to add new services and industry specializations.
“For each firm, there are certain industries we both are very strong in,” said Watson. “For example, in financial services, insurance and health care, we both have a real deep expertise. But as we compared notes over the last 10 months, there clearly were areas where maybe BKD had a specialty that DHG didn't have and where we had a specialty that BKD didn’t have. We’ll be able to take some of the real famous people in those industries and get them working in the new geographies that we will have. The other thing this will do is for both of us to grow and accomplish our national firm objectives individually. It was going to be kind of a slower and expensive process to make that happen, and now that we're able to accomplish that with this transaction, we’re going to be able to invest that capital we would have otherwise deployed into new services and new products and solutions for our clients. So we think it will really help us make truly meaningful investments in new areas like ESG and other evolving items as we move forward to really take care of our clients’ needs in those newer areas as well.”
Both firms have been able to retain many of their employees despite the so-called Great Resignation, but the combination will bolster their ranks.
“What both firms share is a really strong people strategy, and we see this as a strategic advantage, especially coming together as a combined top 10 firm,” said Snow. “Both of us have been adding a lot of team members this year. We’re very pleased with where we see retention rates going at our firms, and we see an opportunity for us to really be a destination employer, if you will, as a combined firm.”
The firms are likely to add more offices as they look at longer-term growth plans.
“We’re able to accomplish a lot of areas on what our short-term goal is, whereas if we look longer term, there clearly are markets where we need to grow, high-potential business areas where we don’t have offices,” said Watson. “We’re not going to get into naming specific markets right now, but there are places where our clients are that we need to be both in a domestic and international perspective, so we’re going to continue to evaluate that as we move forward.”
The combination also promises to provide more career mobility for employees.
“We see this as a net plus for our people because we’re going to have more career options, more career mobility in terms of locations and even more service offerings that our firm will have that our people will have a chance to work on,” said Snow. “Beyond that, we both have a really deep culture of really being a very people-first environment. Like every firm, we came through the time period of the pandemic with higher turnover than we’d expected, but we’ve seen that really taper off and we attribute that to really taking care of our people, and that will not stop, and if anything, it will even strengthen that as a part of this merger.”
The two firms are not looking to compete directly against the Big Four audit firms, but see it as a way to go upstream in tax, consulting and private company audits.
“When you look at our strategy, we’ll certainly pick up more public company audits, but this is not really targeted at that,” said Snow. “We really see a lot of opportunities in the consulting and the tax space, as well as really serving that middle cap to Fortune 1000-size clients in consulting and tax. We don't see ourselves as going after very large Big Four-type audits. It’s just not really part of this strategy, but we do see ourselves going upstream and really serving a broad range of clients in consulting and tax.”
