In its drive to become a one-stop shop of financial services, American Express Tax and Business Services Inc. of Towson said yesterday that it has acquired Wolpoff & Co. LLP, one of Baltimore's largest accounting firms.
The move follows American Express' purchase last October of Baltimore's Walpert, Smullian & Blumenthal and its July acquisition -- its largest to date -- of New York's Goldstein Golub Kessler & Co. PC, the country's largest single-office accounting firm.
"The world is changing very quickly; you can either lead change or be left behind," said Alfred Whiteman, a managing director at the former Walpert, now known as American Express Tax and Business Services in Baltimore. The acquisition does not include the auditing division of Wolpoff.
American Express created the division, which is geared toward small- to midsize businesses, in 1990. In the past seven years, it's acquired more than 70 accounting companies throughout the country, and Bowman's Accounting Report ranks it as the nation's 10th largest accounting firm.
"American Express is doing this because accountants have a grip on clients like no other service provider," said Rick Telberg, editor-in-chief of the trade journal Accounting Today. "If you want to sell something to a small business, you have to get the accountant to buy in. If you own the accountant, you're guaranteed that they'll buy it."
The industry trend of huge conglomerates snapping up smaller accounting firms is client-driven, he said. "The client is demanding it. 'You do my accounting, can't you get me a new computer system?' " Telberg said. "Then the local accountant says, 'If I don't do this, he's going to go somewhere else.' "
Thomas O'Neill, managing partner of Wolpoff, which was founded in 1960, said the decision to sell, although unanimous among the nine equity partners, was not an easy one.
"But we came to the conclusion that [the deal] gave us access to a tremendous amount of resources and it puts us in a position to compete with other accounting firms who are trying to attract clients away from us," he said.
With Wolpoff's 93 employees, the new company will have a staff of 220, with no expected job losses. The directors are still deciding how to combine the two offices, which together saw a reported $20.5 million in revenue in 1996. American Express will keep Wolpoff's Hagerstown office open.
Telberg said he estimates that American Express will see about $200 million in revenue this year in its tax and business services unit.
Brian Eisenbarth, an associate analyst at Collins & Co. in Larkspur, Calif., said acquiring accounting firms offers American Express stability.
"It makes a lot of sense for them because accounting is typically a solid business," he said. "Billings are fairly consistent from quarter to quarter, and there's a constant flow of information. It may help offset American Express businesses that do fluctuate."
"What happened with Wolpoff could happen to half the CPAs working in CPA firms over the next four or five years," Telberg said. "The nature of their jobs may not change. If anything, they'll get nicer offices and new computers because of the infusion of capital. The downside is that we lose a little bit of the mom-and-pop flavor of the CPA business."