Hartford Business Journal

20 HARTFORDBUSINESS.COM | SEPTEMBER 16, 2024 FOCUS | Accounting Frank Milone, founding partner of Glastonbury-based FML, said despite the merger trend, his CPA firm is steadfast in its commitment to stay independent. HBJ PHOTO | STEVE LASCHEVER Business Strategy As merger wave hits accounting industry, here's how some small to midsize firms are maintaining independence technology can help firms enhance collaboration, data analysis and client communication, Andrews said. It can also help with recruiting top talent. Firms would be wise to seek the input of more junior employees on technological advancements. "The younger generation often has valuable insights into using technology more effectively," Andrews said. Private equity eyes accounting Another emerging trend in accounting is private equity investment. Michael Sabol, a founding partner at Glastonbury CPA firm MahoneySabol, said "private equity has continued to explore opportunities to start merging accounting firms together and create bigger firms backed by their money." One of the latest deals occurred in May, when private equity firm New Mountain Capital took an ownership stake in national CPA firm Grant Thornton, which has an office in Hartford. Other U.S. accounting firms that have accepted private equity invest- ment in recent years include Baker Tilly, EisnerAmper, Citrin Cooperman and Cherry Bekaert. Sabol said as partners retire, many small firms struggle to identify and groom the next generation of leaders. This lack of succession planning often leaves firms with no choice but to sell. And, as private equity drives up valuations, the temptation to cash out grows, he said. "There's a lot of value on both sides if it's done right," Sabol said of mergers. "But we've focused on promoting from within and adding strategic hires to continue our growth as an independent firm." MahoneySabol has 65 employees, including 12 partners and 33 CPAs in two offices, in Glastonbury and Essex. Sabol and Andrews said succes- sion planning isn't as simple as designating a new successor. Firms must actively groom and promote younger partners, and transition client relationships and leadership roles to a team of senior leaders to ensure continuity. It's a process that takes years of planning, they said. "You need to constantly invest in people at all levels, building their skill sets so they can take on more responsibilities and drive business development," Andrews said. Mergers and acquisitions In Connecticut, numerous small firms have merged or been acquired by bigger players in recent years, succumbing to the pressures of succession planning, access to talent, and the need for Drew Andrews is the managing partner and CEO of Hartford accounting and consulting firm Whittlesey. CONTRIBUTED PHOTO By Hanna Snyder Gambini hgambini@hartfordbusiness.com T he accounting industry is experiencing a consolidation wave, driven by the ongoing challenges of succession planning for aging partners and the new influ- ence of private equity investment. Connecticut accounting industry leaders said they see no signs of a slowdown in smaller firms merging or being acquired by larger ones. So, the question remains: How can small to midsize firms stay indepen- dent amid these broader challenges? Drew Andrews, managing partner and CEO of Hartford-based accounting and consulting firm Whit- tlesey, said a key strategy is keeping up with the times. Firms must embrace new tech- nology that will increase efficiency and workflow, he said, including automation and artificial intelligence, which is already being used in the industry. "We have to automate processes and stay ahead of technological advancements," Andrews said. "I'm not just looking at what's coming down the line next year, I'm looking at 10 years down the road. The firms that don't modernize will become obsolete." While AI remains new territory in many industries, accountants have found it to be helpful in elim- inating much of the mundane, number-crunching work that junior accountants face early in their careers. Technology allows firms with fewer accountants to work more efficiently, said Andrews, whose firm has 170 employees, including 70 CPAs in offices in Connecticut and Massachusetts. Modernizing outdated software and systems, and investing in new Michael Sabol

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