Editorial… What Is The Future Of Independent Firms?

As we offer our congratulations to Argy, Wiltse & Robinson and Asher on closing their deals with BDO, we must admit that watching these great independent firms being acquired is somewhat disappointing, and makes us wonder what is truly behind their motivations. “We have to get bigger because our clients are demanding it,” seems to be the common refrain among firms who are acquired.

As clients grow and become more sophisticated, what’s the real reason they can’t stay with great local firms? Is it really an issue of resources or is it an issue of perception? Clearly firms like AWR and Asher, both members of well-respected international associations, have access to resources around the globe.

The transparency and the single name and uniform resource availability of a one-stop shop seems to be the driving force behind clients demanding national firm representation. While that perception may have been accurate years ago, in our global marketplace with today’s technological advances, the reality is any firm of this size truly can service its clients. As a profession we have failed at managing client’s expectations and perceptions. As a former executive of an association of independent firms, I believe that all associations need to wrap their arms around this growing issue and figure out now, once and for all, how to address the capabilities and appearance of resource limitations of their member firms.

Sizeable clients should be included in the discussions, and strategic initiatives launched with great speed to overcome the idea that a local or regional firm cannot satisfy a global client’s needs. Associations have always been vulnerable to losing firms to acquisitions, but as they look at the global landscape of the 21st century, they have to find a way to not only provide resources to their member firms but also address the idea of resource limitations that some clients may have about their current firm.

If the alternative is that every IPA 100/200 firm believes that they need to get bigger in order to serve clients, might we end up with 10 to 15 enormous firms? Will mid-size local and regional firms be gutted, with specialty shops and boutique firms serving the other end of the market? Sure, the pendulum would eventually swing back, but until then more and more independent, innovative firms will be gobbled up.

We have tremendous respect for the management teams at the firms mentioned, and wish them great success. But with this announcement, the stars shine a little less bright and the future success of the independent firm seems a little less assured.