It's been another lagging year for growth in specialty services at the Top 100 Firms, which should come as no surprise given the gloomy economic climate. Nevertheless, a number of this year's class of T100 Firms still managed to post gains in select niche areas.
Business valuations bumped out past leader attest services for this year's top specialty niche, as 74 percent of the 80 responding firms reported an increase of business in this area. Attest services dropped to the third spot, going down 10 percentage points from last year's study to 70 percent, with litigation support landing in second place with 73 percent.
Christopher LaDue, director of business valuations at Caturano & Co. in Boston, said that there are essentially two main drivers of the heightened activity around business valuations - increasing levels of regulatory scrutiny in tax and accounting, particularly with respect to new fair value accounting standards, and, on the tax front, with regard to executive compensation such as stock options and deferred tax arrangements.
"We're seeing renewed M&A activity, venture funding and bank lending, IPO activity, and companies emerging from bankruptcies all carrying their own needs for valuation services," LaDue explained, adding that after the financial crisis hit in 2008, valuation practitioners around the country were seeing reductions in billings of anywhere from 20 percent to 40 percent.
"Demand from the government, bond and credit markets has stimulated demand for our forensic accounting, restructuring expertise," explained Scott Peltz, a managing director at RSM McGladrey in Chicago. "Valuation services growth is driven by McGladrey's depth of expertise in dealing with illiquid and exotic assets."
Litigation support saw an increase of one percentage point over last year, with 73 percent of firms reporting growth there.
"Most of our people in litigation support are bilingual, so we'll get a shot at cases where the documents are in Spanish or Portuguese that no else gets," said Tony Argiz, chief executive at Morrison Brown Argiz & Farra in Miami, of his firm's growth in that niche. "Plus, we've brought in some lateral partners in this area to help us out." He also pointed to his firm's aggressiveness in marketing to the local community and building a solid reputation.
Howard Grobstein, a partner in the Los Angeles office of Crowe Horwath, said that having strong roots in the community has brought more business to his firm's fastest growing specialty area - bankruptcy and insolvency. Though fewer firms reported growth in this area over last year, Grobstein said that his firm has seen an influx of work representing debtors, credit committees and receivers, to the tune of 20 percent growth over the past year.
"We have consistently grown the bankruptcy and insolvency practice even during the good times," revealed Grobstein. "The tough economic times have created additional growth in this area. I do see the growth continuing. I don't think the tough economic times have fully trickled through with businesses and individuals, based on the calls we are getting from our referral sources."
Forensics and fraud repeated its No. 4 ranking of last year, even though the number of firms reporting growth in this area decreased by two percentage points.
Elliot Lesser, CPA, CFF, a partner and co-director of the Litigation and Business Valuation Group at Berdon in New York, attributes his firm's growth in litigation support and forensic accounting to a more litigious environment due to the downturn, as well as strong referral relationships with attorneys, and an active fraud-prevention services practice. "We are growing year over year," he said. "We are known for the quality work we do; all three partners in our group have testified extensively, so people know they can come to us."
MIDSIZED BUSINESSES ON TOP
In the area of fastest growing client categories, midsized businesses took the top spot this year, with 69 percent of firms claiming growth in this area - a decrease of three percentage points from last year's study. However, pension plans jumped up four spots from last year to No. 3, with 63 percent of the participating firms reporting growth in this category.
For Donna Massanova, a partner and practice leader for ParenteBeard's employee benefit plan practice in Philadelphia, her service area has seen growth because of the merger between Parente Randolph and Beard Miller in October. Each firm brought to the marriage approximately 350 pension plans. Still, she said that the former Parente Randolph's benefit plan practice was one of its fastest growing prior to the merger, and points to her firm's service model of client service, competitive service fees and trained professionals as reasons why the category has grown. "Benefit plans are looked at as a commodity-based service," explained Massanova, who oversees the area for the firm's 25 offices. "At our practice, we made a decision that we were going to invest in this practice and train our personnel. I believe that has basically put us in the forefront as a firm that provides this level of service to a client."
Nonprofits took the No. 2 spot, and for Tom Raffa, chief executive of Raffa in Washington, D.C., the growth in that business has all come organically. He described the increase as a result of consulting work related to Sarbanes-Oxley compliance, and because the firm has concentrated its service focus on the nonprofit community. "The sector is still growing," he said, adding that nonprofit management and corporate governance are two bustling areas. "I know we continue to get more and more work because of reputation - because they know our name and they come back."
Firms with clients in the entertainment industry also experienced a burst in business, as the category increased 10 percentage points over last year. David Free, the partner-in-charge of SingerLewak's media and entertainment industry group in Los Angeles, estimated that his firm's business in that area grew between 10 and 15 percent. "What happened with us is that I think it's not that the market grew, it's that our market share grew," he said, adding that his firm had added two additional services due to client demand: royalty auditing and production company accounting services, or back-end work for those production companies that don't have a CFO or controller. "We get a lot of referrals from happy clients," he said.
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