National CPA and business advisory firm RSM McGladrey has signed a letter of intent to acquire Caturano & Co., the top regional firm in New England.

The deal would enable Bloomington, Minn.-based RSM McGladrey to expand its Boston-area operations to a combined 500 employees and 216 CPAs. The deal is subject to approval by the board of H&R Block, RSM McGladrey’s parent company.

Financial terms have not been disclosed. The union will merge two Top 100 firms as RSM McGladrey and its sister firm, McGladrey & Pullen, ranked No. 5 on Accounting Today's Top 100 Firms list with combined revenues of $1.46 billion, while Caturano was No. 42, generating revenues of $61.8 million.

With the deal, Caturano chief executive Richard Caturano, who will become managing partner of Boston office, expects to attract more venture capital and private equity clients, as well as higher education clients. The two firms reportedly began discussing a merger last fall when Caturano met Block chairman Richard Breeden, a former SEC commissioner, according to the Boston Business Journal. He later met RSM McGladrey president C.E. Andrews.

C.E. Andrews

RSM McGladrey and its sister firm McGladrey & Pullen operate in an alternative practice structure, with M&P offering audit and attest services, while RSM provides tax, consulting and other services. The two firms nearly parted ways last year, but ultimately renewed an agreement last year to continue the arrangement.

“This deal makes a big statement about how RSM McGladrey and H&R Block are transforming the firm,” said PDI Global, Inc. CEO Allan D. Koltin, who consults on mergers. “You get the impression that last year’s arbitration fight between McGladrey & Pullen and RSM McGladrey/H&R Block is a thing of the past and it’s full steam ahead. Caturano is not only a major player in New England, but they also have an outstanding reputation within the accounting profession throughout the country. If there ever was any question about RSM and H&R Block not being committed to the accounting profession, this deal should erase any doubts.”

Richard Caturano

He believes that under Andrews’ leadership, RSM is transforming into a more profitable and “up-market firm.”

“As part of their goal of becoming more profitable, they have been out-placing selected partners throughout the U.S. who don't fit their model of working on larger clients and/or have a specialization,” Koltin added. “It is interesting to note that this is the second public company to enter the Boston market in less than two years (CBIZ previously acquired Tofias in 2008) and I think we will be seeing one or two mega-regional [firms] also entering the Boston market within the next year.”