BusinessReport.com

When local CPA firm The Gautreau Group completes its merger with the New Orleans firm of LaPort Sehrt Romig Hand in October, it will cap off a yearlong process. The two firms announced earlier this month they were joining to create a company with 110 employees, more than $15 million in revenue and offices in Baton Rouge, Metairie and Covington.

John Gautreau Jr. says while mergers between Baton Rouge and New Orleans law offices have been commonplace in the past 10 to 15 years, this was the first of its kind for area accounting firms.

LSRH was founded in 1946 and is the second-largest accounting firm in metropolitan New Orleans, specializing in fields such as health care, banking and construction. The company started to pick up work in the Capital Region around 2002, attracting major clients such as Baton Rouge General, Tiger Athletic Foundation and Lane Memorial Hospital.

Managing Director William T. Mason says this fit in with the long-term goal of becoming a large regional accounting firm.

“Prior to Katrina we were beginning to discuss the opportunities of putting a full-service office in Baton Rouge,” he says. The firm hadn’t decided if it would open an office from scratch or look for a local firm to merge with.

Mason says it became clear the company had to establish a presence in the Capital Region, based on the clients it had in the area and the potential for new business.

The best course for the company would be to merge with a local firm that had a good reputation, shared LSRH’s values and was interested in expanding. LSRH is part of the RSM McGladrey Network, one of the nation’s largest accounting firms, and the New Orleans firm used a consultant to identify potential partners in Baton Rouge.

Gautreau says he was contacted by a McGladrey consultant last fall about a potential merger with LSRH. “We certainly had feelers out for opportunities to move into the right situation with a larger firm,” he says.

What was driving Gautreau’s search for a larger company to join with was an issue familiar to local businesses of all stripes: the increasing difficulty of finding good employees. “We weren’t having a lot of success in finding qualified, experienced people,” he says. The push for good workers has led to a number of accounting mergers across the country, Gautreau says, as smaller firms move into larger firms.

On three previous occasions, Gautreau had considered merging with accounting firms, but the deals never got very far. The first time he and Crissie Head, a principal in the firm, met with Mason, it was a different situation.

“It was obvious to me from the first meeting that this deal would go a little further,” he says. “I felt very comfortable with them.”

The key? The companies shared the same values: high quality service to clients and a commitment to employees. After the initial meeting, Mason and Gautreau say they realized their two companies had a lot in common. “It was clear that the Gautreau Group fit into our culture very well,” Mason says. “There were a lot of similarities.”

Along with the similarities, there were some appealing differences. The Gautreau Group had a niche taking care of real estate companies. That was a plus with all of the post-hurricane development.

Tax and accounting laws certainly aren’t getting any simpler, leading the CPA industry to focus more on specialization. “The more you specialize and the more knowledge and depth of knowledge and talent you have within those industries, the more value you bring to your clients,” Mason says.

After the initial meeting, LSRH and Gautreau met a dozen more times to talk about the potential for doing business together. Each time, Mason brought over another top person from his company, so Gautreau and Head could become more familiar and comfortable with all of LSRH. “Things just flowed from the first meeting forward,” Gautreau says. “It was always positive when we met.”

By the spring, it became more obvious that the two companies were headed to a deal. Mason began to hire additional employees specifically to work in LSRH’s Baton Rouge office.

Putting together the actual deal was fairly simple because the two companies had larger issues in common, Mason says. “Because we were all comfortable, it was easy to piece the financial part together,” Gautreau says.

The key in the merger, which didn’t involve any cash, was that Gautreau and Head stay with LSRH to lead the Baton Rouge management team. LSRH didn’t want to buy clients; they wanted Gautreau’s management and employees.

The reaction from employees and clients about the merger has been positive. Employees believe there will be opportunities to move into different niches, such as health care or real estate, or advance to another office. “They see there’s a real opportunity for us to continue on the growth track we’ve been on,” Mason says.

Gautreau had worked with local real estate firms since 1977, but he says it was worth giving up some of his independence to play a role in a larger company. There’s freedom in entrepreneurship, but a burden in having to do administrative tasks, such as human resources. Joining with LSRH allows him to do what he does best—be an accountant.

Mason says the move sets up LSRH to be a major accounting firm. “We’re very well positioned to grab a great deal of the growth that’s going along the Interstate 10-Interstate 12 corridor,” he says, “especially given our geographic locations.”