Houston-based McConnell & Jones LLP announced that it will be merging with Durham, N.C.-based Thomas & Gibbs CPAs PLLC, effective July 1.
The deal marks McConnell Jones first foray into North Carolina; it already has offices in Houston, Dallas, and Austin, Texas, and in Washington, D.C.
"We're filling in a gap there between the Southwest and the Mid-Atlantic," McConnell Jones managing partner Wayne McConnell told Accounting Today. "We currently have current clients that we work with in North Carolina, as well as in so many other states in the Southeast — in Tennessee and Florida, for instance. So it's giving us a physical presence."
"Growing organically in a new region is a little bit tougher than that doing an acquisition where they already have a footprint there," he continued. "And so we feel like there's a lot of value associated with them being physically in that area. They've got tons of relationships there. … It provides a really sound solid, foundation for us to expand in North Carolina and throughout the rest of the Southeast."
Financial terms were not disclosed, but Ken Gibbs and Shawana Spann will join McConnell Jones as partners, bringing the firm's total to 11. The firm will keep their offices in Durham, and will have 158 employees across its five offices.
Founded in 2001, Thomas & Gibbs offers a range of tax, accounting and audit services, with particular strengths in client accounting services, and it has a strong presence in the nonprofit and government space.
"They already have a presence in nonprofits and governments … so Shawana Spann is going to be leading our nonprofit practice," said McConnell. "Ken Gibbs is not only a CPA, but also a lawyer, so we're getting two for the price of one there. We do some IRS representation, but with him being a lawyer, we feel like that's the space that we'll be able to expand more with him coming on board."
Thomas & Gibbs also brings expertise in another area McConnell is interested in: offshoring.
"They're doing some offshoring already, which is not something that we're doing," he explained. "So we're really excited about joining forces with them. They've already vetted the vendor that they're using and they're very comfortable with them, and have been working with them for a couple of years. And so we are looking at expanding that to include our clients on that same platform and with that same vendor."
The process, and the future
The two firms became acquainted through the Diverse Organization of Firms, an affiliate of the National Association of Black Accountants that brings together Black and other minority owners of CPA and professional services firms.
"One of my partners, Odysseus Lanier, is the immediate past chair of that organization and … he met the partners at Thomas & Gibbs at one of their meetings, and struck up a conversation with them," recalled McConnell.
That was early in 2022; over the next year and a half, the firms began talking more seriously.
"We had them come over and visit our offices, and we went over and visited their offices, and they expressed an interest in doing a transaction," said McConnell. "We feel like it was a good cultural fit; when they came over and met with our partners, there was positive energy in the room, the chemistry was good and it just feels good. For me personally, my intuition told me that here's a couple of folks that are really good people, and the more time we spent with them, the better we felt about it."
McConnell Jones is not a regular acquirer; its last deal, which resulted in its presence in Washington, was a few years ago — but the firm is open to more.
"We do growth through organic means, of course, but we think that M&A is certainly an integral part of what we're doing," said McConnell. "We have sweet spots already, and we want to cross-saturate those sweet spots, to continue to grow that and sell that sweet spot, but we're also looking for acquisitions to buttress that growth."
They also have some specific markets in mind.
"We've made a run at a couple firms in the Chicago area," he noted. "So the Midwest would be a target, and the city of Atlanta is also another attractive target for us. So those are a couple of cities — one that currently sits in the Southeastern region, that being Atlanta, and of course Chicago's the third largest city in the country. Who would not want to be in Chicago?"
He also noted South Florida as another potential area for expansion, as the firm does a lot of work there.
With all that said, the firm remains committed to organic growth, too.
"We have a pretty robust marketing and business development engine," he said. "We've got pipelines set up in each of our respective sweet spots, and our consulting, tax and audit practices meet once a month. We're using Microsoft CRM to track our business development activities. Each partner has been charged with goals established around that growth."
That proactive approach to new business complements another source of growth that emerged in 2020.
"Quite frankly, after the George Floyd incident, our phone was ringing," McConnell said. "Folks were reaching out to us given that we're African American-owned firm. And so there's been a fair amount of activity as a result of the corporate community reaching out to satisfy some of their ESG goals."
McConnell Jones was already established in the corporate space, and remains committed to it.
"We're being very proactive in our own approach to approaching corporate America, and even before George Floyd, we had a large presence in the corporate community," said McConnell. "We're a firm that provides good quality service; we just happen to be African American-owned, and so we have made the investments, and we feel like we're corporate-ready and able to respond when called, but we're also ensuring that we are aggressively pursuing opportunities where we know that we do that work."
