BDO USA LLP is expanding its New York metropolitan area practice by merging in Charles A. Barragato & Company, a firm with offices in New York City and Long Island that specializes in servicing high net worth individuals and family offices.
[IMGCAP(1)]The deal will add 38 new people, including six partners, to BDO, along with approximately $7 million in annual revenue, according to Barragato. BDO, based in Chicago, earns approximately $1.2 billion in annual revenue and ranks 7th on Accounting Today’s 2016 list of the Top 100 Firms.
The merger is BDO USA’s 18th M&A deal in the past four years, according to CEO Wayne Berson. “In the past four years we’ve added more than 2,000 staff through the 18 deals around the country,” he told Accounting Today in an interview Tuesday. “Combined with organic growth, our total staff has now more than doubled to approximately 6,000.”
Besides high net worth individuals and family offices, Barragato also services entertainers, health care providers, real estate investors and developers. The combination is expected to be completed on July 1, 2016.
The two firms got to know each other through Barragato’s involvement in the BDO Alliance, and BDO’s desire to expand its presence in New York.
“Looking at high net worth individuals, family offices, and health care providers, these are all areas we are expanding in,” said Berson. “It ties in perfectly with what we’re trying to do, which is to get into a number of the more nontraditional areas.”
[IMGCAP(2)]Chuck Barragato, who has more than 35 years of experience in public accounting and founded the firm in 1998, will succeed Randy Schwartzman as the office managing partner for BDO USA’s Long Island tax practice, allowing Schwartzman to focus his energies on his role as regional managing partner for the Northeast Region tax practice, as well as serving his Long Island-based clients. Barragato will also take on a leadership role in developing BDO's Private Client Services practice in the Northeast region. A current BDO partner, John Kyriakides, will continue to serve as the office managing partner for the Long Island assurance practice.
Barragato said his firm has been approached by others over the years about doing a merger, but he was attracted by BDO. “The industry is going through a period of consolidation, and given this climate we’ve been approached from time to time by a number of interested firms that were either seeking to expand into the New York market or to take a further foothold in the niche that we work in, which is primarily with high net worth individuals, family offices and health care,” he said. “But we never felt it made sense for our people or our clients. That being said, we’ve also been a member of the BDO Alliance for the past seven years, and we’ve really gotten to know the BDO firm and the leadership and seen the direction where the firm has been heading. That, coupled with the fact that we learned they were looking to build out their Private Client Services group and put a significant emphasis in the health care practice, these two areas are our core strengths, so it seemed to make sense for us to have a dialogue. One thing led to another, and having that seven-year courting period was helpful.”
Having similar cultures was also important, according to Barragato. “It’s got to be the right match from a cultural perspective,” he said. “Doing a combination will enable us to amplify what we’ve already built in the private client services space and in the health care space, but now we will be able to do this on a national and global platform. That was the impetus for the discussions, and that’s where we are today. We’re really excited about the opportunities, and I think it’s going to be a great combination.”
Berson and Barragato anticipate the two firms will eventually consolidate their Manhattan and Long Island offices. “In the foreseeable future, we’re going to maintain both offices,” said Barragato. “Then we’ll probably move into the Melville office on Long Island and the Park Avenue office in New York City.”
BDO will have nearly 1,000 people in the New York area, according to Berson. “With CAB, their strength with high net worth individuals, family offices and also health care—an industry that we’re really expanding a lot in—this ties in very well with what we’re seeing is happening in New York,” he said. “The New York metropolitan region is a market we’ve been targeting. We wanted to increase critical mass and we’ve been looking for growth opportunities in New York.”
Earlier this month, BDO expanded to Utah by merging in Mantyla McReynolds in Salt Lake City (see BDO Merges in Mantyla McReynolds to Expand to Utah). Berson said BDO is also looking at several other M&A deals in other parts of the country in the near future. “We are continuing to have discussions with numerous firms around the country,” he said. “As you can imagine, there’s a lot of interest in joining BDO. From a geographic standpoint we have added a great deal to our Central region and our Atlantic region. We would like to add in the Southeast, and we are working hard in that area.”
BDO is also looking to expand its practice in several areas, some of which fit in with the deal with Barragato’s firm. “Beyond geography we are also looking to add resources to areas of growing demand, like private client services, wealth management, transaction advisory, outsourcing, cybersecurity, data analytics, risk advisory and actuarial services,” said Berson. “CAB hits private client services, wealth management and risk advisory. We are talking to many firms at the moment, but we don’t have anything signed. We’re probably close on one or maybe two.”
Berson said BDO has to be careful about which firms it brings into deals, however. “We’ve actually turned away more firms than we’ve signed deals with,” he said. “We have to be careful because at the end of the day you want to retain the BDO culture. For us, it’s important that the firm coming in share a similar culture to what we have, so we do take our time in putting together a deal. We want to make sure the people that are coming in will fit in people wise as well as client wise. I have no doubt CAB is going to be like that.”
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