For those who recall the New York World’s Fair which ran from 1963 to1965, some of you may also remember one particular exhibit which featured a machine that spewed giant smoke rings in the air. Now, the smoke machine certainly wasn’t one of the more spectacular exhibits at the fair — in fact all it did was blow smoke rings — but for some reason, it generated sort of a cult following.
All visitors to the attraction even received a free button emblazoned with the phrase “Meet me at the the smoke ring.” And, incredibly, I think I still have mine in a drawer along with a “Goldwater for President” button.
Now before you begin writing in questioning my grammatical skills, the second “the” was purposely inserted on the souvenir to see if both the wearer and the reader were paying close attention.
Sort of like an impromptu copy-editing test. At age eight, I promptly failed, but that’s fodder for another column.
I mention this now because I believe this is the year for the accounting firm consolidators to prove that the buzz of five years ago wasn’t as fleeting as, well, a smoke ring.
The concept of firm roll-ups was an idea, that, on paper, looked like its time had come. Fueled by a go-go economy, consolidators led by the initial entrant into the field — American Express Tax & Business Services — began gobbling up willing acquirees with the zeal of a day care center on a field trip to McDonald’s.
Amex was followed in turn by H&R Block, Century Business Services and finally, three years ago, Centerprise, which was formed with the merger of five of the larger regional firms.
But the market backlash of the technology bust, coupled with a difficult business model to execute, stalled the consolidators’ respective M&A engines to a period more resembling hibernation than anything else.
But after a period of hibernation, things in that segment may be beginning to stir.
Following a major management reshuffle, AmEx TBS is now in a large-scale domestic partnership with German software developer SAP to launch a U.S. edition of a SAP’s management software for small and midsize businesses, while Centerprise recently named long-time KPMG consulting veteran James McGuire as its new chief executive.
McGuire, who helped parlay KPMG’s consulting arm from a $700-million a year division to one generating $2.5 billion in revenue, used just the right language upon his appointment.
He spoke of brand synergy, redefining the business model and finding the organization’s “white space.” Now whether he can effectively fuse that into a profitable strategy remains to be seen.
The ensuing year will probably serve as a fairly accurate bellwether as to the future of national consolidators.
The question is whether there will be a roll-up model for the future or simply an idea now relegated to once-novel concepts like Goldwater for President or meeting someone at the the smoke ring.
