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Rothstein Kass and KPMG Merger Chitchat

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By Tamika Cody
March 6, 2014

For the last few weeks the accounting profession’s rumor mill has been buzzing with stories that Rothstein Kass is about to be acquired by KPMG. Is this all just a matter of frantic speculation, or could this rumor actually have some truth to it?

So far, this is what we are hearing: According to a source familiar with the situation, there are a number of respectable accounting firms receiving a ton of resumes from Rothstein Kass. Most of the jobseekers are coming from Rothstein Kass’ alternative investment side, specifically those who have worked with hedge fund clients. The source familiar with the situation has connected the dots and noted that KPMG is trying to step up its presence in the hedge fund industry.

Is it safe to assume that those who didn’t make the cut from Rothstein Kass’ hedge fund team are the same ones sending their resumes out to reputable accounting firms around the nation, or is the firm trimming down to be more appealing for KPMG to snap up?

If you recall a conversation or a meeting that may lead you to believe that KPMG and Rothstein Kass are ready join to forces and there is a letter of intent ready to be signed, please reach out to us here at Accounting Today and let us know.

Let’s first tackle all of these Rothstein Kass resumes floating around. Jay Nisberg, a well-known consultant to the accounting profession, said it’s not a good idea to trust the resume trail. “I wouldn’t say the firm is scaling down. In many cases they may have been asked to leave. Of course they don’t position themselves that way on the streets.”

If the KPMG-Rothstein Kass merger is actually a valid dialogue, Nisberg noted it could be that some of Rothstein Kass’ employees may just be evaluating their options. “I’m more inclined to believe that they are opting out, assuming that they don’t want to be in a Big Four environment,” said Nisberg, who has no affiliation with Rothstein Kass.

On the other hand, the resume trail may act as an indicator that there could be some substance to what’s being funneled through the grapevine.

“What you have when resumes are in the streets are those people telling prospective employers that the firm is in play,” said Allan Koltin, CEO of Koltin Consulting Group. He added that he doesn’t know if there is a deal going on, nor is he involved in any way.

Now it’s time to look at the strategic angle in this possible merger. As our source familiar pointed out, KPMG is trying to increase its presence in the hedge fund arena. Industry sources concur that that Rothstein Kass and KPMG have many niches in common, but the most alluring is the hedge fund business.

“I have to believe that the key motivation here is increased resources, increased capital and the ability to attract much larger and more sophisticated hedge funds which Rothstein Kass can do independently,” said Nisberg.

Since the hedge fund idea seems so tempting, why not just acquire the financial services portion of Rothstein Kass? Nisberg said he wouldn’t be surprised if this actually was the case, but he believes that “it would make perfect sense for both sides to do the entire amalgamation.”

So what is the other part to KPMG’s strategic growth advantages? Industry sources are convinced that the Big Four firm is trying to play catch-up with PwC, Ernst & Young and Deloitte, which have all been focused on their strategic growth for the last 10 years.

Koltin mentioned that some of his Top 100 Firm clients, which have been contacted by KPMG, said the Big Four firm is trying to make its way back into the middle market.

“If the strategy of re-entering the middle market and going after highly successful niche firms is the goal, this would be the perfect firm for them to talk to,” Koltin said, referring to Rothstein Kass.

“Clearly, if KPMG is able to acquire Rothstein Kass, that would be an incredible coup,” Koltin continued. “It’s a top 25 firm and it has good industry practices [compared to] any firm in the country,” he said.

Koltin noted that he doesn’t have any factual knowledge nor is he involved with the merger, and he has not talked with either side about the possibility of a merger.

With that said, the KPMG and Rothstein Kass combination is still just a rumor. And it’s not the first time the two were in the middle of merger gossip.

About a year ago the rumor mill started to churn with reports that KPMG and Rothstein Kass were about to pair up. As soon as the wheel started to spin, it quickly stopped. The suspected deal and the chatter just vanished. What came next were some strategic moves from Rothstein Kass’ side that sparked chatter that the firm needed to polish up its act so that KPMG would find them more attractive.

In April 2013, the firm trimmed down and cut approximately 10 percent of its staff. Rothstein Kass’s leadership team swore the layoffs had nothing to do with preparing themselves for a sale to KPMG. The firm also stated that the process was nothing new and that they cut back after the busy tax season.

We reached out to Rothstein Kass’ communication team, as well as KPMG, but they have yet to return calls or respond via email for comment. At the end of the day we really didn’t expect them to, nor are they obligated to. The only thing they have to do is represent their partners and consider opportunities that may be in the best interest of their firm. After all it’s their fiduciary duty. Right?

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