The merger of DiSanto, Priest & Co. and Markarian & Meehan Ltd. on the surface looks like a relatively straightforward deal between two local accounting firms trying to grow together in the Ocean State.
But look a little closer at the deal and it reveals how accounting is evolving in Rhode Island and elsewhere around the country, as the industry is faced with a host of challenges related to competition, talent retention and costly capital investments.
“By us doing this deal, and focusing on privately held businesses, we’ve positioned ourselves to compete with the bigger firms,” said Emilio Colapietro, managing partner at DiSanto, Priest. “When we look at the competitive landscape in the next few years, I think a lot of the smaller firms may not be around because they haven’t been working on succession planning, so we see market opportunity there.”
Indeed, the noncash deal boosts DiSanto, Priest’s certified public accountants total to 41 people from 36, according to PBN research, bringing it closer to the headcounts of Kahn, Litwin, Renza & Co. Ltd., CBIZ & Mayer Hoffman McCann P.C. and BlumShapiro.
The four companies represent the largest accounting firms in Rhode Island.
The deal, completed on Jan. 1, also gives Warwick-based DiSanto, Priest a greater share of the market in southern Rhode Island, where Markarian & Meehan has maintained a robust book of clients. The Markarian & Meehan book includes many privately held companies and ultra-high net worth individuals built up over more than two decades, and its proximity to the ocean has proved lucrative in the local fishing industry.
“The merger adds market share, certainly in the southern part of the state, and it adds a footprint into the commercial fishing industry,” said Steven Zaroogian, managing partner at Markarian & Meehan.
The South Kingstown firm, based in the village of Wakefield, was started in the 1970s by Tom Markarian, who left the accounting giant PricewaterhouseCoopers, known better as PwC, to start his own firm.
Markarian, who died last March, built the company from four employees to its current level of about 25. The company – which Zaroogian calls a “boutique” firm – has worked with a variety of clients with different financial needs, including bookkeeping for small businesses and multimillion-dollar transactions for publicly traded companies.
Zaroogian and his two partners will join DiSanto, Priest as partners. He became managing partner of Markarian & Meehan three years ago, and said the collective goal has been largely to steer the ship built by Markarian and his partner Tim Meehan, who also retired a few years ago.
“We made a commitment that we were going to continue the legacy,” Zaroogian said. “We took that very seriously.”
A few years ago, Zaroogian realized continuing that legacy would require addressing a mounting need for new technology, a prevalent trend across industries but especially in accounting and financial services.
Markarian & Meehan thus faced a crossroads of whether to make the capital investment themselves, or look for a company to partner with that already had those capabilities.
“I think of it this way: When it comes to advancing technology, it’s a capital investment plus a people investment, it’s really twofold. We were in the midst of making that capital and people investment, and we were making some nice strides, but then we met with [DiSanto, Priest] and we saw their technology was cutting-edge,” Zaroogian said.
“Why invest in the hardware, software and people when we can plug into the model and short-circuit the process along the way?” he asked rhetorically.
Technology is widely identified as one of the top challenges facing the accounting industry. The software creates a certain level of frustration in an industry trying to keep up with its rapid advancement, but it also represents opportunity that continues to be discovered.
Staying ahead of the curve helps companies, such as DiSanto, Priest, attract and retain talent across generations, another challenge facing the industry.
“Back in 2003, we started investing heavily in technology and that’s just continued,” Colapietro said. “Technology has always been a strong point of the firm, and it resonates well with our people when we’re attracting entry-level or high-level talent.
“The more technology, the better,” he added.
Looking ahead, Colapietro says the company will continue to look for opportunities to grow. DiSanto, Priest, which will retain its name, has more physical space available at its Warwick offices. And while there’s nothing imminent, Colapietro says the firm will continue to distinguish itself from larger regional and national firms because it maintains a close-knit relationship with clients.
Adding the Markarian & Meehan team, he added, only helps.
“Unlike the bigger firms with a lot of turnover, we have very little,” Colapietro said. “That’s important in maintaining continuity with clients. That will allow us to grow.”
