L.A. accounting offices recorded solid growth on their ledgers for the past 12 months – and early indicators point toward another strong run in front of them.
The top 100 companies on the Business Journal’s annual list of accounting firms reported a cumulative growth rate of 5.5 percent in accounting professionals staffing their offices in Los Angeles County, just about double the pace of the previous year.
The top 100 firms combined for 11,150 accounting professionals in their L.A. offices as of last month, up nearly 600 from a year ago and nearly 900 from two years ago.
A robust local economy, a steady stream of mergers and acquisitions and the accounting firms’ own moves to diversify into technology consulting contributed to the growth in accounting staff over the whole year.
“Our practice is mirroring the strong local economy,” said Patricia O’Connell, partner and chief operating officer with West Los Angeles-based Holthouse Carlin & Van Trigt, which at No. 5 on the Business Journal list, is the largest locally based accounting firm. HCVT added 58 accounting professionals over the last 12 months for a total of 346, representing a growth rate of 20 percent.
“We’re seeing expanded work from our existing clients and bringing in a lot of new clients,” O’Connell said.
Among the areas she said are seeing the strongest demand for accounting and related services: handling mergers and acquisitions, real estate, private equity deals and baby boomer clients looking to sell their businesses.
Tax reform boost
The trend also got a year-end boost with the passage of the federal tax reform act, which is likely to drive demand for more accounting services as companies and individuals sort out its ramifications.
The legislation is the largest tax reform package enacted since 1986. It includes permanent cuts in corporate tax rates and temporary reductions on individual tax rates. It offsets some of the effects of the cuts by removing numerous deductions, including for state and local taxes. It also changes tax rates for pass-through income from businesses, which is expected to benefit independent contractors, small business owners and many investment funds. And it lowers the tax rate for cash or assets brought back into the U.S. from overseas.
All the changes mean more work for accounting firms.
“It’s much broader than just figuring out the tax dollars,” said Stefanie Kane, Los Angeles market managing partner with the downtown office of PricewaterhouseCoopers, the top firm on the Business Journal list. “Steps will likely be taken to prepare for or react to tax reform, such as changing legal entity organization and capital asset acquisitions or deployment.”
Kane said that later this year, she expects an “upswing in work” as companies begin to focus on the tax code changes. That may in turn lead to the hiring of more accounting and tax professionals, she said.
Other local firms have already begun hiring accounting professionals to deal with changes from the tax reform package. At No. 2 Ernst & Young, Patrick Niemann, managing partner for the greater Los Angeles region, said hiring started last fall as tax reform discussions in Congress became serious.
“We saw tax reform coming, even if we didn’t have all the details,” Niemann said. “We knew there would be very high demand for more tax services from our clients, so we increased our hiring levels.”
No. 13 CLA also increased hiring late last year in anticipation of the passage of tax reform, according to Randy Wells, managing principal of the Los Angeles office.
Movement in middle ranks
This year’s list saw no changes in position among the top 10 accounting firms. The “Big Four” firms with global reach – PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte – kept their respective spots atop the heap; each has more than 1,000 accounting professionals in their L.A. offices. Then it’s a sharp drop in staff to No. 5 HCVT with its 346 accounting professionals.
All but one of the top 10 reported adding accounting professionals last year; Deloitte had a slight drop of less than 1 percent. Michelle Kerrick, managing partner with Deloitte’s Los Angeles office, said the firm has hired more professionals for the consulting side of its business, which includes strategic consulting and digital/information technology consulting services. “We strive to be able to bring all those insights to the tax and accounting clients that we serve,” Kerrick said.
There was much more movement among the Nos. 11 through 40 spots, led by No. 13 CLA, which shot up from the No. 40 slot last year as it nearly quadrupled its accounting staff through acquisition of two mid-sized L.A. accounting firms. Top L.A. principal Wells said the acquisitions are part of a strategy to propel the firm – which specializes in companies with less than $200 million in revenues – into the ranks of the top 10 in the Los Angeles market.
“Nationally, our firm seeks to be in the top 10 in each market; in L.A. for years we did not have much presence here,” Wells said. “But L.A. has such a huge middle market for companies, which fits right in with our focus.”
Among other big gainers in accounting professional staff were No. 16 SingerLewak, with a 36 percent increase to 144, and No. 19 Squar Milner, with a 31 percent jump to 121. SingerLewak moved up three spots, while Squar Milner moved up two.
Only five firms reported staff drops exceeding 10 percent.