Top Five Firm RSM US LLP has agreed to acquire substantially all the assets of Padgett Stratemann, the fourth largest local CPA firm in Texas.
The deal is expected to close on August 16.
The combination will give RSM new offices in San Antonio and Austin, in addition to its current offices in Dallas and Houston. The firm expects to have roughly 700 staff in the Lone Star State.
“The new Texas locations, San Antonio and Austin, were both locations we’d been interested in for a while,” said RSM managing partner and CEO Joe Adams in an interview with Accounting Today. “Three years ago we merged in a firm in Houston, which was wildly successful, and we see some of the same opportunities in Austin.”
Apart from location, Adams also cited Padgett Stratemann’s strong leadership and complimentary culture as major factors in the deal: “We talked to a number of firms in Texas, and this was the one that we really wanted.”
“By joining forces with RSM, we are taking the natural next step in our growth strategy and our relationship with RSM,” said John Wright, managing partner for Padgett Stratemann, in a statement. “We’re pleased to join a firm that offers our clients and employees expanded resources, opportunities and global capabilities, while maintaining a small-firm culture and a strong commitment to the communities where we live and work.” Wright will continue to lead the San Antonio and Austin offices.
“We’ve known them for a long time,” said Adams. “I’ve known John and we’ve known the firm for 21 years. It was just time.”
Padgett Stratemann was founded in 1945. It reported revenues of $34.8 million in 2015, and has over 200 employees. It offers audit, tax and advisory services to clients in a range of industries, including construction, manufacturing/retail/distribution, financial institutions, energy, state and local government, and government contracting industries.
The San Antonio-based firm had been a member of RSM’s network of independent firms, the McGladrey Alliance, for over 21 years.
Beyond August 16
While RSM is open to more M&A, it’s not an indispensable part of its long-term plan. “We do have a broad strategy – initially we focused on the top 25 markets, but we’ve expanded that to the top 125 markets,” Adams said. “Long-term, we want coverage across the whole U.S. -- but we’re not in the acquisition business to be in the acquisition business. We want the right fit. When the fit is there, and it’s in a market we want to be in, we’ll merge. But we don’t merge just to merge.”
In Texas, for instance, the firm isn’t pursuing anything more at the moment. “At this point, we’re in the four critical markets that we’ve identified in Texas – San Antonio, Austin, Houston and Dallas – those were the ones we most coveted when we looked at Texas as a whole,” he explained. “To the extent that another opportunity comes along, we’d look at it, but we want to make sure that we assimilate this one well right now.”
In the end, Adams emphasized one critical point in how the firm evaluates potential mergers: “I can’t say enough about the importance of culture -- we’ve walked away from many mergers because of culture, but in the right place and with the right people – we’re always interested.”
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