by Seth Fineberg

High Point and Asheville, N.C. -- The pending marriage of Dixon Odom and Crisp Hughes Evans not only marks one of 2003’s largest mergers between strong regional firms, but could be a harbinger of future unions that ultimately create a fleet of super-regionals.

In November, strong regional firms Dixon Odom and Crisp Hughes Evans agreed to a merger effective Jan. 1. The combined entity, which would operate as Dixon Hughes, would have aggregate revenues of nearly $95 million and a staff of more than 725.

That figure would also include staff and revenues from pending, and comparatively smaller, acquisitions such as CHE’s recent purchase of Hansen, Johnson & Associates, a smaller CPA firm in Hendersonville, N.C., and Dixon Odom’s purchase of Winston- Salem, N.C.-based Royster Smith Shelton & Co.

But sheer size was not the impetus behind the merger that created Dixon Hughes -- at least not entirely. The deal had more to do with the desire to grow and strengthen niche and specialty services.

“Our goal in combining the firms is to become even better, not just bigger,” said Eddie Sams, executive member of Dixon Odom. “By combining resources and similar cultures, we are creating even greater opportunities -- for the firm, our staff and our clients.”

Ken Hughes, managing partner of Crisp Hughes Evans, concurred with Sams, adding, “We looked at why we should merge, and at the advantages of doing so, and immediately we saw our similarities in geography and the fact we are both trying to grow our firms by niches.”

Sams and Hughes will share the leadership of the newly created organization as co-managing members.

Once official, Dixon Hughes will easily surpass the Southeast region’s former leader, Cherry Bekaert & Holland, of Richmond, Va., which posted 2002 revenues of $54.1 million, according to the 2003 Accounting Today Top 100 Firms report.

On that Top 100 Firms list, Dixon Odom ranked No. 34, with revenues of $44.6 million, while Crisp Hughes Evans was No. 42, generating annual revenues of $31 million.

In many ways, there are clear similarities between the merger and this year’s union of two other regional powerhouses --New Jersey-based J.H. Cohn and the Videre Group.

In terms of combined revenue, Dixon Hughes will be on par with the Cohn-Videre marriage. That deal, finalized in June, also created the largest firm in the Northeast, totaling approximately $95 million in combined revenue.

Hughes noted that the merger strengthens his firm’s health care practice, as well as its practices in government work, dealer services and construction.

Dixon Hughes will also have substantial industry concentrations in auto dealerships, financial institutions, insurance, manufacturing, distribution, real estate and not-for-profit work. It will also offer corporate governance and risk assurance assistance.

Both firms’ registration applications were recently approved by the Public Company Accounting Oversight Board to prepare and issue audit reports for publicly held companies.

The two firms had discussed the idea of a merger over the past three to four years, and finally decided in January of this year to make a serious move.

“We have both referred clients to each other when it made sense, and even though we’re technically competitors, we’ve each had a high degree of respect for our firms,” Hughes said. “The biggest challenge I see for us over the next several months is making sure we keep focused on what we are in business for, that being client service and providing opportunities for our partners.”

The similarity in cultures and management philosophies is seen as a true advantage in a successful merger.

As noted practice management consultant Allan Koltin, president and chief executive officer of Chicago-based PDI Global Inc., pointed out, “The reason this will really work is they have spent an inordinate amount of time getting to know each other, their common cultures and best practices. They did it right -- spent the quality time -- and this merger will give them a much stronger position in the marketplace when all is said and done.”

Koltin did not help put this particular deal together. Instead, the two firms opted to work with an organizational consultant, Brooks Gallagher, of Greenville, S.C.-based Behavior Resources. Gallagher, who had worked with Crisp Hughes Evans on previous mergers, assisted in identifying and addressing all the issues of this union, and does not see many things standing in the way of the new firm’s success.

“They are both consensus builders and have invested themselves, as opposed to outsourcing the whole piece of the integration process, as many firms often do,” Gallagher said. “They are each involved in every step of planning and integration. Once the ink is dry, they have a plan to actively work to integrate.”

Gallagher noted that the future firm’s only real challenge is in “maintaining their edge with this kind of growth, and retaining quality staff and clients in the process.”

From a geographical perspective, the firms overlap quite a bit already, but the deal will strengthen their presence in key markets such as Atlanta and Charlotte, N.C.

For the foreseeable future, Dixon Hughes will not have one corporate headquarters, but will retain the two firms’ head offices in Asheville, and High Point.

The firm will also have other offices and affiliated entities in Alabama, California (its dealership advisory services), Georgia, South Carolina, Tennessee, Texas and West Virginia.

Koltin noted that the firm’s increased presence in the Southeast, and Atlanta in particular, is likely to cause many in the area to consider mergers or partnerships of their own in order to be competitive.

He predicted that several firms in the region would likely double in size in the next three to five years, either through organic growth or mergers and acquisitions.

Those mentioned include Atlanta-based Habif, Arogeti & Wynne; Decosimo CPA Firm, of Chattanooga, Tenn.; Horne CPA Group, in Jackson, Miss.; Lattimore Black Morgan & Cain, in Brentwood, Tenn.; and Carr Riggs & Co., of Enterprise, Ala.

“There is a new landscape on the rise, and for mega-regional and large local firms, there is a big difference between being a $30 million firm and a $100 million firm,” said Koltin. “The latter will have a much easier time servicing larger private companies in the $100 million-to-$500 million range. For a firm like Dixon Hughes, if I’m a $500 million company, I’m used to dealing with a national firm, but now they are as big as a middle-market national firm and can handle it.”

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