Urge to Merge: M&A fever hits accounting and insurance firms

The merger trend among local independent insurance agencies, which shifted into high gear last year, is also hitting the public accounting sector.

Traverse City-based Dennis, Gartland & Niergarth (DGN), northern Michigan’s largest, locally owned public accounting firm, last month purchased Hill, Schroderus & Company, a Petoskey-based accounting firm.

The acquisition creates a 60-person public accounting firm that expands its reach throughout northwest Michigan in providing accounting, tax and consulting services to businesses, local governments and individuals. DGN was formed in 1973.


Managing partner Shelley Bedford said Hill, Schroderus & Company, founded in 1961, provides her firm with an even greater depth of accounting expertise.

“(The firm) has a long-standing reputation and commitment to client service,” she said. “We admire the leadership they have shown to clients and the accounting industry as a whole.”

Industry experts say public accounting firms are merging at a fast clip because of business succession issues and the growing costs of regulatory and technology demands.

“What’s fueling the M&A activity, beyond aging management, is the extensive number of regulatory changes and the material investment firms are looking at with technology due to risk management and IT security issues,” said industry consultant Bob Lewis in a recent issue of Accounting Today.

Recent mergers are less about growing revenue and more about aligning with similar firms or penetrating new geographic locations, said Lewis, president of The Visionary Group in suburban Chicago.

All those factors figured into Hill, Schroderus’s decision to merger with DGN, said partner Jim Cusenza.

“It takes a lot of resources to cross all the t’s and dot all the i’s,” in regulatory matters, he said.


Plus, the Traverse City firm has a human resources department, which the eight-member Petoskey firm lacked. Cusenza, who is staying on with the merged firm, said that will give him more time for other duties.

“It just seemed like we aligned philosophically in our relationships with clients,” Cusenza said about the merger. “It seemed like a good fit.”

Another Traverse City-based public accounting firm, Kindlinger & Company, PC, merged in October with the Traverse City office of Vanderwal Spratto & Richards, PC.

Dale Vanderwal of the Vanderwal Spratto firm, joined Kindlinger as a principal. Scott Myers from Vanderwal Spratto joined Kindlinger as its small business manager.

Vanderwal Spratto also had a Manistee office, which has been renamed Richards & McDougall PC.

“Our firms are very similar and align well,” said Kindlinger President Christopher W. Kindlinger, who has owned the firm since 1994. “I met Dale 30 years ago and have respected him ever since. He will be a great fit, and I look forward to him being part of our team.”

Kindlinger & Company, PC, merged in October with the Traverse City office of Vanderwal Spratto & Richards, PC. (Pictured l-r): Chuck Pittenger, Jenn Watkins, James West, Dane Hadfield, Levi Berlin, Chris Kindlinger, Rebecca Adler, Dale Vanderwal, Thomas Kindlinger, Deann Stewart, Scott Verhage and Scott Myers

Kindlinger specializes in providing accounting and tax services to small businesses and high net worth individuals.

On the insurance agency side, it’s been a busy year of mergers and acquisitions for KorthaseFlinn Insurance & Financial Services, a 93-year-old insurance agency based in Boyne City.

In April the firm acquired the Northern Michigan Benefits Agency of Charlevoix, which followed its January acquisition of the Glasser Insurance Agency of Gaylord.

Then, in May, KorthaseFlinn was acquired by Traverse City-based High Street Insurance Partners, which was created last year by Detroit-based private equity firm Huron Capital to buy independent insurance agencies that offer business, property, casualty and other lines of insurance.

And in June, High Street acquired the Tompkins Insurance Agency in Traverse City from Steven Tompkins and rolled it into KorthaseFlinn, which will continue to operate under the KorthaseFlinn name.

“Expanding into the Traverse City market has been on our strategic roadmap for several years and we were fortunate to connect with Steven at the right time,” KorthaseFlinn President Randy Flinn said in a news release.

KorthaseFlinn now serves more than 21,000 customers from offices in Boyne City, Petoskey, East Jordan, Gaylord and Traverse City.

Industry officials and experts say insurance agencies offer a lucrative, low-risk business opportunity for large acquirers that can consolidate back office functions, implement new technologies and use their market power to negotiate better prices from insurance companies, such as State Farm and Allstate.

Acquirers like High Street and Grand Rapids-based Acrisure, which acquired Shumsky West and Larkin Group agencies under the Larkin Group name in 2015, also provide way for small agency owners nearing retirement to cash out of their businesses.

Last year, some 600 insurance agencies and brokers nationwide were acquired, according to consulting firm Ernst & Young, which expects the trend to accelerate.

High Street’s first acquisition in Traverse City was Peterson McGregor & Associates, which it purchased in August of last year. It has since purchased four independent insurance agencies, including KorthaseFlinn and Tomkins.

Its most recent acquisition was the Ottawa Kent Insurance Agency, which it acquired in September. Ottawa Kent, which has been in business for 40 years, is one of the largest insurance agencies in the Grand Rapids area.