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Friday, Jun 21, 2024

Squar Milner Combining With Baker Tilly

Steve Milner is usually the one doing the acquiring, having built Squar Milner LLP in part by buying eight firms to become the fourth-largest accounting firm headquartered in California.

Then last November, he began entertaining the idea of becoming even bigger by teaming with Chicago-based Baker Tilly LLP.

Being on the receiving end of an offer was a different feeling, Milner said.

“We knew what to expect,” the managing partner of Squar Milner told the Business Journal. “We felt comfortable.”

That beginning culminated in a deal announced Aug. 13, where Irvine-based Squar Milner, the largest accounting firm headquartered in Orange County, is combining with Baker Tilly as of Nov. 1.

The combined companies, which will be called Baker Tilly US, will have about 4,300 employees and annual revenue around $1 billion.

Squar Milner expected to do about $135 million as a stand-alone company this year; it counts 550 employees including partners, with about 200 based in Irvine.

It provides audit, tax, consulting, wealth management and other services to public and private businesses, and nonprofit organizations, in a variety of industries.

“We are creating a new organization with substantial scale—a true combination of two leading advisory CPA firms that are forward-thinking and future-leaning,” Baker Tilly Chief Executive Alan Whitman said in a statement. “Together we are driving progress for a new world, combining our knowledge and expertise to guide our clients through anything.”

Milner will take over as head of West Coast operations for the combined firm, and will have about 650 employees reporting to him. He said the bigger scale will allow it to win larger clients.

“We know we will be invited to parties that we previously weren’t,” Milner said.

Pandemic Effect

A 10th generation native of Southern California, Milner grew up in Huntington Beach and graduated from Mater Dei High School in Santa Ana. An English graduate from UCLA, Milner also has a law degree from Pepperdine University, a masters of tax laws from George Washington University and attended the Institut Superieur des Sciences Economique et Commerciales in Paris.

Milner, 61, founded the firm in 1990. He steadily built the company through organic growth, saying he grew as his clients did.

He also made acquisitions; its biggest prior deal was in 2018 when it acquired DZH Phillips LLP in San Francisco to become the fourth-largest accounting firm headquartered in California.

Then late last year, Milner began speaking with Baker Tilly executives, whom he had known from prior years. The companies saw the deal as a great way to become one of the 10 biggest firms in the country. They were preparing for the deal when the pandemic struck in March.

“People were scared” about losing their jobs, Milner recalled.

Like other firms, Milner sent most of his employees to work from their homes, saying many were already flexible because they often work at the sites of clients.

He kept in touch with employees through conference calls, including on Zoom, where his dog would sometimes interrupt. He held virtual happy hours and saw some employees increase their abilities to levels that he didn’t expect.

“The productivity was surprisingly great,” he said. “I’m so proud of our employees.”

The coronavirus has forced businesses to change forever, such as the retail industry now going online and restaurants becoming more reliant on takeout orders, Milner said. Companies are more dependent on technology than ever before.

“It’s an ongoing period of change on the scale of World War I or World War II,” Milner said.

He closely follows government regulations, saying the best result in the November elections would be a stalemate in Washington, D.C. He’s worried that a potential California increase in its income tax could cause more business owners to leave the state. He believes forecasts such as Chapman University’s and UCLA’s that the economy will rebound later this year.

“You will see a recovery,” he predicted. “What is changing is how industry is doing business.”

The Deal

Throughout the pandemic, executives at the two companies spoke daily about a variety of issues like new tax laws, liquidity and employee fears.

The combination wasn’t done because of liquidity issues, Milner said, noting his accounting firm didn’t lay off any of its employees and is in the process of issuing bonuses.

As the pandemic wore on, Milner said he became more comfortable with Baker Tilly executives through their daily communications.

“The pandemic was the catalyst to get the deal done,” he said.

The deal permits Baker Tilly to grab a bigger foothold in California where Squar Milner has eight offices. Baker Tilly noted that if California were a country, it would be the world’s fifth-largest economy.

“Squar Milner’s explosive growth and strong position in the Golden State is driven by their expanding client relationships and their professionals’ on-the-ground local presence and knowledge of the state’s unique markets,” Baker Tilly said in its statement.

Baker Tilly has been on an acquisition spree in the past 24 months, expanding into Texas and bolstering its capabilities with several acquisitions in data analytics, municipal advisory, global forensic accounting, valuation and litigation services.

The new Baker Tilly will have offices in many of the world’s leading financial centers—New York, London, San Francisco, Los Angeles and Chicago.

While Milner knows such a deal is typically seen as an acquisition by the larger firm that keeps the name, he considers it a combination because besides him, several of his executives will take key roles at the company:

• Ernest Miranda, who is in charge of Squar Milner’s SEC practice, will assume the same position for the combined company.

• Craig Weaver, who is in charge of Squar Milner’s tax services, will take on the same nationwide role at the combined company.

Milner, Miranda and Weaver will also join the firm’s 12-member executive leadership team. Also, Squar Milner’s Gabe Torre, a tax partner, and Ahmed Hamdy, an audit partner, will be on the combined company’s 15-member Board of Partners.

Sign of Change

Milner said the firm will retain its Orange County office, which he said the leases were recently renewed, as well as its office in San Diego and San Francisco.

The firm is considering different approaches to its workspaces given the current environment, said Milner, who noted that leasing prices have fallen about 25% since the pandemic began.

Squar Milner’s headquarters are at the Irvine Towers office complex. The company’s building top signage on the corner of Michelson Drive and Von Karman Avenue will be changed to Baker Tilly, he said.

“We are still very much dedicated to serving our California communities, and we are delighted to have the coast-to-coast and global advantage,” Milner said.

Three Lessons from the Pandemic

Squar Milner LLP Managing Partner Steve Milner says he’s learned three lessons from the coronavirus:

• Video conferences such as Zoom are a more effective way to meet than in conference rooms.

• His company doesn’t need as much office space as before.

• “You cannot create an office culture remotely.”

An office culture relies on people learning new things through osmosis such as discussing and hearing what others are doing, Milner said.

“Those who know what to do, do it. Those who don’t know what to do won’t be learning because they’re not in the office.”

—Peter J. Brennan

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.

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