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By Geoff Kirbyson
Published April 1, 2009
Publication: The Bottom Line (Adobe PDF Document) (1.35 MB)
Despite the economic turbulence rumbling across the country, two Western Canadian-based firms are confident they have the right stuff to weather the storm.
There’s no question particular business units at Meyers Norris Penny LLP and MacKay LLP are down since last fall, but others have turned up as the economic malaise has spread.
Daryl Ritchie, CEO of Calgary-based MNP, says the slowdown is simply part of the business cycle. Regardless of where the economy is heading, however, the firm’s clients still need help.
“They’ll need different help. We refer to it as changing times. You need to be changing as well so you can make sure you’re able to help clients. There are always shifting priorities, there will always be changes made. We’re not shutting down any areas, we’ll shift resources around,” he says.“We’re a very diverse firm with a full-service line. You can imagine this isn’t a bad time to be in the insolvency business or forensics and it’s not a great time to be in the corporate finance business.”
Hugh Livingstone, CEO of Vancouver-based MacKay, says its Calgary office is feeling the pinch with the price of oil hovering in the US$40 per barrel range, a far cry from its all-time high of about US$147 per barrel last summer. But activity at its Vancouver office continues to grow with public company and auditing work, while its Kelowna outlet has a constant market for its tax services. Its Edmonton, Whitehorse and Yellowknife offices have a full slate of First Nations work, too.
“I’m happy the corner of North America that we’re in, we’re not feeling (the economic downturn) in the same way as Ontario or the U.S. Locally, we have the Olympics coming in 2010 so we’ve had our own home-grown stimulus package in B.C. There’s $900 million being spent on security and there’s lots of construction going on,” he says.
MacKay had revenue growth of 16 per cent, 28 per cent and 12 per cent from 2006 to 2008.
Livingstone says he expects growth at the 15th-biggest accounting firm in the country, which had $37.9 million in revenue last year, to fall off slightly in 2009 but he doesn’t “see the sky falling.”
“Twelve per cent is still nice growth. If we continue to grow, that tells us we’re doing extremely well. What you would worry about is a contraction,” Livingstone says.
“Our strategic plan has us looking at being a $100-million firm in 2020. We think it may not accelerate in the next couple of years in terms of organic growth but we’re optimistic we’ll get there.”
Livingstone says MacKay is always on the lookout to expand beyond the Alberta Saskatchewan border. “They have strategic fits with us with resource work and First Nations work. We can solve other people’s problems (with a merger),” he says.
Ritchie says even after expanding at an average of 20 per cent per year for two decades, MNP isn’t showing many signs of slowing down. Nothing more than a slight tap on the brake.
“Some years we grow at 18 per cent, some years it’s 22 per cent. We expect we’ll average around 20 per cent for the next five years. In 2009, it’s most likely to be a little slower than average. Last year was a little faster. The economy is going to grow slower, so firms are going to grow slower,” he says.
MNP had revenue of $260 million last year, up nearly 24 per cent from $210 million in 2007. That’s good enough to be the seventh-biggest accounting firm in the country. Its original goal was to build a strong Western Canadian firm, but it decided to go national with last year’s merger with Toronto-based Horwath Orenstein LLP. The midmarket accounting firm added 80 employees to MNP’s payroll, bringing its workforce to more than 2,000 people. The eastern expansion continued last month with a merger with Shiner Kideckel Zweig, an insolvency f irm with eight offices in and around Toronto.
Ritchie says the f irm hasn’t decided where it might expand next — it already has 75 full and part-time locations from Victoria to southern Ontario — but it plans to go beyond Toronto’s 416 area code.
“It won’t just be a Toronto expansion; it will be a southern Ontario expansion. When or if we expand further east than Ontario, we haven’t decided yet,” he says, noting the economic slowdown isn’t significant enough to cause any of MNP’s plans or initiatives to be delayed.
Not all of its growth is coming from the acquisition trail, however. Organic growth was good enough in Winnipeg that the company decided to relocate its operations from the suburbs to the corner of Portage Ave. and Main St. — the heart of downtown Winnipeg. It traded in its former longtime home in St. James for twoand-a-half floors in Canwest Place, one of the city’s business towers.
Trevor Sprague, a partner in the Winnipeg off ice, says the move was made to be closer to the network of lawyers and financial institutions that its people deal with regularly on behalf of clients.
“Downtown is where the centre of business activity is. As the firm has grown, we want to make a clear indication that we’re open for business and we’re a major player in the Winnipeg marketplace,” he says.
John Carpenter, CEO of CGA Alberta, says successful accountants and firms like MNP and MacKay are able to adapt to the needs of their clients and the circumstances those clients face.
“Versatility matters and a new environment will likely require a change in the service mix offered by larger f irms, along with the resources secured and deployed in support of those services. The accounting profession, accounting firms, and accounting educators will respond to those demands as they have to environmental changes in the past,” he says.
“Our real world experience is sufficiently broad, practical and informed to help our clients through most of what they will face in good times or in confronting adversity.”
Ritchie says there is also a silver lining to the economic slowdown as retention isn’t likely to be
as great a challenge as it has been over the past few years. He says when the economy is firing on all cylinders, industry recruits a lot of people from accounting firms at precisely the same time as firms are trying to poach top people from each other.
“This could be a really good time for recruiting some really strong people because of the slowdown,” he says.
Livingstone says the recruiting pendulum has already started to swing back its way. “A couple of years ago, recruiters were phoning our people at home all the time. Now we’re starting to see unsolicited resumes are coming to us. There has been a shift,” he says.
“We think investing in our people will make us more competitive and a better firm."
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