BKD lands second-largest acquisition in its history

Growth is nothing new for Springfield-based accounting firm BKD LLP. But executives say the current environment is ripe for acquisitions that bolster its national reputation.

In the past month, BKD entered two deals that expand its presence in Chicagoland and increase its service support from the Dallas metroplex.

BKD announced Sept. 26 its purchase of Pantego, Texas-based loan review services firm Kacinski & Associates Inc. for an undisclosed amount. Three days later, BKD officials said they signed an agreement to acquire Wolf & Co., a 2,000-client firm with wealth management and personal financial planning services. Terms of the deal, which is expected to close Nov. 1, were undisclosed.

CEO Ted Dickman said the latest deal, which adds 140 employees to BKD’s ranks and increases tenfold its Chicago-area client list, is the second largest acquisition in the firm’s 91-year history.

Combined, the acquisitions boost BKD’s annual revenue to $475 million and give it 34 offices in 15 primarily Midwestern states. In August, BKD ranked No. 12 in the country on Inside Public Accounting’s Top 100 accounting firms list, based on $445.3 million in fiscal 2014 revenue. The firm’s tally is up 6.5 percent from last year.

With the acquisitions, BKD’s position on the list wouldn’t move, but the firm is in closer striking distance to No. 11, New York-based CohnReznick LLP, with $508.2 million.

Expanding BKD’s reach in Chicago was a key strategic move by the firm’s governing board, Dickman said.

“We’ve spent a lot of time talking to firms there, and I think we found a really good fit for us,” he said.

Wolf & Co. was listed by Crain’s Chicago Business as the 15th largest accounting firm in the Chicago area. Dickman said BKD was courting Wolf & Co. for two years before the deal was penned.

“About six months ago, the relationship had grown to the point where they were interested in having a more serious discussion about their firm combining with BKD,” Dickman said.

While health care is BKD’s largest industry sector, he said Wolf & Co. brings expertise to its other top client industries in the nonprofit, government and manufacturing sectors.

The Texas deal brings BKD’s loan review practice client base above 200 banks, offering credit risk management advice. Dickman said the buyout of the niche firm adds 10 employees to BKD’s loan review division, which operates out of Houston, Texas, Indianapolis and Kansas City.

The moves come amid an improving M&A environment. In the 12 months ending Aug. 31, merger activity was up 9.3 percent to 10,828 mergers closed, according to September’s U.S. MergerMetrics report published by FactSet Research Systems Inc. (NYSE: FDS). Big buyouts were driving the trend as 277 deals were valued above $1 billion, up 34 percent from the previous 12 months. Transactions of $500 million to $999.9 million also climbed 34 percent to 215, according to the merger report.

The data showed increases in all categories of mergers above $50 million in value and declines in all deals under that baseline. For example, there were 726 acquisitions under $10 million, down 11 percent from the previous 12 months.  

FactSet Research reports technology and commercial services led all activity in the past year, with about 460 deals in each sector.

In Springfield, business broker Scott Axon said M&A activity this year is beating 2013 volumes, but the number of deals is still behind the prerecession years of 2006 and 2007.

“The M&A market in Springfield has made significant progress and continues to improve,” said Axon of Kingsley Group Business Brokers, adding the balance sheets of many companies still have not fully recovered. “We still have not gotten back to financial health in many sectors that we had before the crash.”

However, he said lending is ripe for M&A activity.

“Buyers and corporations looking to make acquisitions seem to have adequate cash levels. The challenge is finding healthy, growing, profitable companies that would like to go through a merger or acquisition,” Axon said, declining to disclose Kingsley Group’s volumes or recent assisted transactions.

He said the firm’s M&A deals through September are more than 5 percent higher, compared to the same period in 2013. Last year, Axon said acquisition activity had fallen by around 33 percent throughout the recession and Kingsley had only regained about half of that loss through the end of 2012.

The recent deals for BKD continue a corporate growth strategy in place for over a decade. Since 2000, Dickman said BKD has picked up around 15 accounting firms.

“We’ve had periods where we’ve done more, and we’ve had periods where it’s been relatively quiet. I would say we are in a period here where we are a little more aggressive in trying to increase our geographic growth,” said Dickman, who works from BKD’s Indianapolis office. “We just keeping morphing out, adding another ring of states and locations. A year ago this time, we expanded into western Pennsylvania, so that’s another ring out to the east, and Chicago pushes us farther north.”

In 2001, BKD peaked on Inside Public Accounting’s list of top firm’s by revenue at No. 7. That year, the Springfield company had doubled its size with its largest acquisition in history – Olive LLP in Indianapolis – pushing its annual revenues at the time to over $200 million.

After a decade of being on Inside Public Accounting’s top 10 list, BKD was bumped two spots last year even with posting 4 percent annual revenue growth. Dickman said M&A activity has been prominent in the public accounting industry, and BKD is trying to keep pace.

“We’ve got to continue to be aggressive in order to maintain our position,” Dickman said. “Our goal is to grow to become a truly national firm over time.”