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The numbers game.

The Numbers Game

What's in a name? Ask Frank Zipursky. He's the last original founding partner of the international accounting firm, Laventhol and Horwath. For 23 years Zipursky and his associates have provided chartered accounting services under that name. Each office in Canada and the U.S. operated autonomously but, nonetheless, they were known as Laventhol and Horwath. South of the border the name has been tarnished by the company's bankruptcy. Last year the Toronto and Vancouver offices merged with Price Waterhouse. That leaves the strong and independent Winnipeg office and one in Montreal.

Speculation as to whether the Winnipeg office would follow in the merger line is met with a firm answer from Zipursky. "There are no merger discussions with anyone," he says. But should he stick with the same name? Zipursky hasn't decided.

There's been a swirl of name changing in the chartered accounting community over the past two years. The most obvious resulted from the shuffling that took place among the international firms known as the "big eight." Deloitte & Touche, Peat Marwick Thorne, Coopers & Lybrand, and ERnst & Young are some of the new names resulting from mergers. Mergers based on the profession's rush to keep up with world markets, specialization, and client demand for increased services and information.

In 1989 the business community watched as the international firms seemed to burst from the starting line and into the global marketplace, each eventually taking their palces with new partners.

"It was no real secret. All of the large firms including Price Waterhouse had chosen dancing partners. All were poised to move into mega-mergers if any one of the top eight firms started to move," says Robert Plaxton (FCA), managing partner, Price Waterhouse, Winnipeg. Price Waterhouse's courtship with Arthur Andersen fell short of the altar. The result: Price Waterhouse came out of the race wearing the same name.

Why the rush? The accounting firms recognized that to meet the demands of their major client base -- multi-national corporations -- they needed to put the resources in place quickly and efficiently. That meant adding staff and technology plus the support of an equally larger client base.

Another reason for the hurry, according to Plaxton, was the increased concentration of business that was to result from the mergers. "Everyone jumped quickly because they knew they'd never be able to do it again," says Plaxton, confident that regulatory agencies in the U.S. won't allow any further mergers between the large international firms.

At the time, the news brought demands within the industry and media for further regulation and laments for the future loss of mid-sized firms, client service, increased fees and conflict of interest.

Time has passed and the dust has settled. As Walter Dubowec (FCA) points out, while the business decisions driving the mergers were global, Canada's accounting market is distinct. Dubowec, managing partner at Deloitte & Touche, says that rather than being focused solely on multi-national corporate clients, the large Canadian firms are more broadly based. Owner-managed businesses represented a significant percentage of their business, he adds.

Different still is the Manitoba market where global demands seem scaled down for the majority of businesses. And the prophecies of 1989 have been moderate in their results.

Instead of being squeezed out, mid-size firms are alive and doing well in the market. John Craig, partner, Scarrow & Donald, points to steady growth over the past two years. Established in 1985, the firm's growth in size is the result of its own merger within another local accounting firm along with new client business.

"We've also received some business as a result of the large firms merging," says Craig. "Our clients were satisfied with the service, but they had some concerns about the fees being charged."

Greg Doyle, office managing partner at Peat Marwick Thorne, says the mega-mergers have to be put in perspective for the Manitoba market. "In Winnipeg whether your firm has 65 or 165 people you tend to be mid-sized. There are no mega-offices here," he explains.

Sill Streuber Fiske & Company, a Manitoba-based firm founded in 1910, has taken another approach to providing clients with access to international markets and a broad network of resources. The firm is affiliated with Moore Stephens, an international accounting firm with offices around the world.

Norman Fiske (FCA), a managing partner at Sill, says, "It gives us the ability for example, to apply a client's taxation question to any part of the world."

And yet, as Fiske stresses, the partners still enjoy their independence and the ability to control their destiny. "We've been approached by the national firms over the years but our independence is not something we want to give up.

"You've got to be big enough to survive in this world," he says. "Big enough to handle the majority of the questions, without having to offer all the specialized services."

The questions clients ask are shaping not only the services but the very face of the profession. The accounting/audit service is the backbone of the profession, but its role in the business varies from firm to firm.

As Plaxton puts it: "We've really in the information business."

So as the questions have become more sophisticated and complex, so has the specialization of those giving the answers.

The traditional business advisor role has broadened and been formalized in the larger firms, who are fighting to grow their share of the client's business. You'll find formal consulting services in areas such as financial planning, mergers and acquisitions, litigation support and forensic accounting.

However, Fiske cautions that while there's the demand for specialists, titles can be dubious.

"We have partners with various degrees of knowledge in various areas but we don't venture to say we have a specialist in our firm," says Fiske who adds that there's no professional specialist accreditation process in place.

Brent McLean, president of the Institute of Chartered Accountants of Manitoba, recognizes the dramatic changes the profession is undergoing. The accreditation of specialists is just one of the priorities the institute is currently facing.

"The process of coming up with sections and accreditation of specialists has to move quickly," says McLean. "If the profession doesn't meet the demands of the specialists then they'll form their own group outside of the accounting profession."

Can chartered accountants afford to specialize in a market the size of Manitoba? The answer is a qualified yes -- it's a matter of scale and client base.

In Winnipeg, most companies don't carry the staff with that kind of expertise, so they turn to outside advisors on a more consistent basis.

Success for chartered accounting firms means balancing the demand for services with the realities of doing business in a recession. Add on intense competition, speculation of sustained rapid change for the profession, and it seems the accounting community is faced with some steep challenges.

Manitoba is a tough market, according to Zipursky. However, there's room to grow as long as you service your clients well, he adds.
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Title Annotation:Manitoba accounting firms
Author:Avery, Lydia
Publication:Manitoba Business
Date:Mar 1, 1991
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