By now the accounting profession is up to speed on KPMG acquiring Rothstein Kass. It was a pairing that kept the rumor mill churning. (see KPMG, Rothstein Kass Merger Official). Speculation on the merger went on for years, but resurfaced last summer after Rothstein Kass’ CEO, Steven Kass, sent out a memo telling his employees that the firm was “not for sale.”

“The interesting thing is that the while those rumors were persisting through 2013, there was no truth to them,” Kass told Accounting Today. He said the baseless rumors caused a disturbance throughout the organization, and he needed to shut down the chatter in the letter he wrote to his staff. “I think everybody has seen that letter. It was the truth, and I wouldn’t have sent anything like that if it wasn’t the truth.”

Once the gossip settled, and Rothstein Kass’ brand continued to get broader, the firm started to face some challenges and realized that it wasn’t able to service the global needs of larger institutions. “We felt in order for our organization to get to the next level to continue to provide the institutional and global space, we needed a greater reach,” Kass said. “It became obvious to us that in order for us to continue to grow as an organization, we needed a bigger platform. Nothing is forever and circumstances change.”

Although the accounting profession continued to speculate about the KPMG and Rothstein Kass collaboration, formal acquisition discussions didn’t start until the beginning of this year. “To be quite honest, we didn’t literally start talking to the principals of [Rothstein Kass] until January 2014,” Scott Ozanus, deputy chairman and COO of KPMG, said in an interview (see KPMG Found a Gem in Rothstein Kass).

Kass clarified that it was KPMG that sought out Rothstein Kass and the preliminary meeting took place on January 11. “We did not go out looking for it,” said Kass. “That was the first time that we ever met to talk about [KPMG’s] philosophy, and Rothstein Kass and its philosophy.”

Once Rothstein Kass’ leaders agreed to sit down with the leaders of KPMG to hear what they had to say, the two realized that the firms were an ideal match. “It became very apparent, very quickly just how complementary we were to each other,” Kass recalled.

Kass said the first meeting “ended up being a brainstorming get-together.” The two spent time discussing organizational culture, what was important to the firms, market opportunities and challenges. “We realized that there was a tremendous opportunity for us to explore coming together,” said Kass, noting that there weren’t any lawyers or investment advisors telling them what they should do. “It was an opportunity that was presented… It just became more apparent that this was a terrific fit for both of us.”

Piece of Advice

Kass, who will continue with KPMG, added that it’s important to note that Big Four firms just don’t go around snapping up public accounting firms. There has to be a compelling reason for them to seek out a merger or acquisition of another firm. “What was attractive in this transaction was our dominate niche presence, which was complementary and synergistic to where KPMG wanted to go in the alternative investment space,” said Kass.

The idea of merging just to merge upstream is not a common opportunity for those on the Top 100 Firms list, and Kass advises those firms that are contemplating a deal to do it for the right reasons. “What are you trying to achieve? What’s the goal? If it’s all about critical mass, you are going to have a lot of other challenges that come along with that.”