Clifton Gunderson and LarsonAllen have confirmed they plan to merge in the New Year into a combined firm known as CliftonLarsonAllen.

The two firms said Tuesday they would combine, effective January 2, to create one of the top 10 accounting firms in the U.S., with combined revenues of between $550 million and $560 million.

Milwaukee-based Clifton Gunderson ranked 15th on Accounting Today’s 2011 list of the Top 100 Firms, while Minneapolis-based LarsonAllen ranked 18th, but together they would have ranked in 8th place. The combination is expected to create a powerhouse, especially in serving privately held companies, not-for-profits and governmental clients. They plan to create a holding company that will include three specialty firms to handle professional services and accounting, outsourcing of finance and business processes, and wealth management.

The firms have worked together closely in the past, including on peer reviews. “Our two firms periodically meet,” said Clifton Gunderson CEO Kris McMasters in an interview. “We started talking and sharing strategy and saw that if we brought our firms together, we had a lot of synergies and cultural similarities. We felt like we could bring something unique to the marketplace.”

The two firms began discussions in the spring and made rapid progress.

“As often happens in our profession, firms get together to talk about what it might look like if they ever were to come together and how they might help each other,” said LarsonAllen CEO Gordy Viere. “Generally it doesn’t come to anything, but as we started to have conversations together, more and more it started to seem like we do look at the world going forward in a similar manner. We have a similar approach in how we want to help people with their careers, and in the markets we want to serve. As we continued to talk, it just started to feel more and more comfortable. The more difficult issues like the name of the firm and the management structure and those types of things, where most firms struggle, we just seemed to get through in a really comfortable manner, and so the longer we talked, the more it felt like we needed to do this. We thought the marketplace was looking for a different kind of firm, and we felt we could be that firm.”

The combined firm will have in the range of 80 to 85 offices, according to McMasters, with approximately 3,600 combined employees, including about 500 partners in 25 states and Washington, D.C.

All of the partners and principals in the two firms will become partners in the combined CliftonLarsonAllen and will essentially retain the same responsibilities that they currently have, according to McMasters. Some of the executive management will remain in Milwaukee and others in Minneapolis, in addition to the other offices across the country. McMasters will become CEO of the professional services and advisory firm, while Viere will become CEO of the holding company to focus on the wealth management and outsourcing pieces of the practice. The holding company will oversee the entire organization, including the new advisory, wealth management and outsourcing firms.

The two firms belong to different international alliances, Clifton Gunderson with HLB International and LarsonAllen with Nexia, but they have not decided in which alliance they will remain. They plan to continue concentrating on private company clients, along with not-for-profits and governmental clients, but at least one observer believes they may eventually expand to handling public company audits.

“Mergers and consolidations of firms are continuing to take place at a record pace, but now we are seeing more ‘super-sizing’ types of deals like these than ever before,” said Koltin Consulting Group CEO Allan D. Koltin, who has worked with both firms on previous mergers. “They will have combined niche expertise in banking, and LarsenAllen brings over a great health care practice, while Clifton brings over its very successful governmental and nonprofit practice. One now has to wonder if they will enter the Big Apple, and in doing so if they will also enter the world of SEC audits, an area both firms have stayed away from in the past.”

McMasters emphasized that the two firms plan to continue targeting private company clients.

“Both of our firms are uniquely focused on private companies and the owners of private companies,” she said. “We will be, we believe, the only top 10 firm with that focus. We will be the resource center, the champions, the trusted business advisors, for private companies and their owners.”

She noted that both firms have placed a high priority on growth through mergers and acquisitions. They are also deeply involved in several industries, including health care, financial institutions, manufacturing, public sector government and not-for-profits.

“We really believe that combined we can take our industry specializations to all new levels,” said McMasters. “This also allows us the opportunity to be fairly dominant in several metropolitan markets, which is important to us as a combined organization, but also continue with our non-metro strategy too. We are probably the two largest firms that focus on both metro and non-metro locations, and we’re going to continue that strategy going forward.”

McMasters anticipates a smooth transition. “Luckily we’ve taken a look at the synergies in the ways that we go about the work that we do,” she said. “We use the same kind of software. The processes are very similar, so that’s certainly going to help the transition. We’re very familiar with what each other does. We’ve done the peer review of LarsonAllen the past couple of years, and we’re familiar with their methods, from an assurance standpoint for sure. We’ve been friendly firms for many years.”

Viere believes the new firm will be able to bring to the marketplace the capabilities of a large firm with the service attitude of a small firm with a competitive value. He foresees the combined firm providing a career path for aspiring accountants in different fields with industry expertise.

“We think this is a firm that could position themselves to be recognized as a career-building firm, in other words, the place where people would choose to come to determine what their career might be,” he said. “That would mean we would have multiple career opportunities within the firm, especially as we have agreed to build not only a public accounting advisory firm, but also a wealth advisory firm and an outsourcing firm, highly integrated, and we would bring our industry specializations to all three of those. Therefore, we could give opportunities for different career paths to people. In addition we would let it be known in the marketplace that if you come to CliftonLarsonAllen and you decide that someday you want to have a career in health care or banking or financial services, and you felt that career was better suited for you outside our firm, we would try to give you the experience and the learning and training within our firm to make you more valuable in the marketplace, so that we all win. You win, the firm wins while you’re here, and our clients win when you would leave us to join them. Obviously we believe that we’ll be a winner in that process, because the more people of talent who join us to see who we are, the odds of us keeping them are pretty good.”

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