Baker Tilly Virchow Krause plans to merge with Beers + Cutler to create the 13th largest accounting firm in the U.S., with over $250 million in revenue.

The merger, scheduled to take effect Dec. 1, will create a combined firm with over 1,400 team members. It will also allow Baker Tilly Virchow Krause to expand to the Washington, D.C., area and provide a base for expanding further across the East Coast.

Madison, Wis.-based Virchow, Krause & Co. LLP changed its name on June 1 to Baker Tilly Virchow Krause LLP, and became the exclusive U.S.-branded firm in the Baker Tilly International network (see Virchow Krause Changes Name to Baker Tilly). The firm is now based in Chicago.

Beers + Cutler was also a member of the international accounting firm network. Baker Tilly CEO Tim Christen said he had planned to expand to New York before Washington, D.C., but the opportunity presented itself first in the D.C. area.

“Originally our intention would have been to sequence New York ahead of Washington, but we contacted [Beers + Cutler managing partner] Ed Offterdinger as part of the long-term plan, and when the opportunity arose, we pursued that vigorously,” he said.

Offterdinger will serve as regional managing partner of the firm’s East Coast practice and as vice chairman of the firm’s management committee. Beers + Cutler cut 17 percent of its workforce in the past year and now has 264 employees and partners. In 2008, the firm reported a total of 332 employees.

Christen noted that Beers + Cutler fit his ideal criteria for a merger candidate, including a commitment to deep specialization, large offices, superior growth possibilities and profitability, and a longstanding relationship. He was also attracted to the firm’s service areas, including real estate-related services, government contracting and risk advisory services. Both firms have robust dealership practices, and Christen believes the combination will provide a strong boost to his firm’s private equity practice.

Christen still hopes to find a New York firm to merge with in the next six months, but he has decided to look outside the Baker Tilly network. “We have a very close relationship with the Baker Tilly firms in New York, but it does not appear to be the right time for a merger with them so we are looking beyond the Baker Tilly network,” he said. “It’s our intention to build the firm to $400 million by 2012,” he added.

Allan Koltin, CEO of Chicago-based M&A consultancy PDI Global, sees the move as a positive one. “It is an amazing story in that it marks the first big step for Virchow Krause since they changed their name and vision to Baker Tilly,” he said. “Not only did they get a ‘best in breed’ firm, they made a statement loud and clear that the ‘train is running’ and we are going to become a national firm.”

Baker Tilly is one of Koltin’s clients, and he is helping the firm look for additional firms to merge with in the New York and Los Angeles markets.

Baker Tilly Virchow Krause ranks 17th on Accounting Today’s 2009 list of the Top 100 Firms with $216 million in net revenue for 2008. The firm now reports net revenue for 2009 of $206 million.

Beers + Cutler ranked 42nd in the Top 100, with revenue for 2008 of $60.32 million. It was founded in 1976, has more than 260 people, and will continue to operate from its Vienna, Va., location. The Baker Tilly network comprises 145 independent accounting firms in 110 countries and over 25,000 professionals.

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