Coleman & Grant Agrees to Merger With Touche Ross

Coleman & Grant, Orange County’s largest independent accounting firm, agreed Thursday to merge with Touche Ross & Co., one of the “Big Eight” national accounting firms.

The addition of Coleman & Grant’s 70 accountants will vault Touche Ross from ninth to fifth place among Orange County accounting firms, based on staff size.

Chris Massey, managing partner for Touche Ross in Orange County, said the firm sought the merger because of Coleman’s expertise in tax and real estate accounting and to provide Touche Ross with a broader presence in Orange County’s booming business community.

“Five years ago, there were just two $1 billion companies in Orange County,” Massey said. “Today, there are 11. The marketplace for accounting is absolutely sensational. And we want to be there in the 1990s to get our share of the business.”

Firm to Double Size

The merged operation, which doubles the size of Touche Ross in Orange County, will have 12 partners, 160 accountants and a total staff of 190.

Massey said Coleman & Grant’s seven partners received cash compensation from Touche Ross as part of the merger, but he declined to elaborate on the transaction.

Mark C. Coleman, managing partner for Coleman & Grant, said that being able to offer Touche Ross’s auditing capabilities to his firm’s clients was a primary motivation for the merger. Coleman also declined to discuss details of the agreement.

“Our clients have grown in size and sophistication,” Coleman said. “We believe the complete range of services that only an international Big Eight firm such as Touche Ross can offer will be of great benefit to our client base.”

Both managing partners said Coleman & Grant will be combined with Touche Ross as a “completely intact” entity, with all of its personnel remaining on board.

Massey said Coleman would be assigned to establish a new Southern California real estate services division for Touche Ross. Coleman & Grant’s six other partners and staff of 85 also will join Touche Ross.

Coleman co-founded the firm in 1975 with Robert B. Grant. The two-man operation grew swiftly along with the regional economy, and Coleman & Grant eventually became Orange County’s largest independent accounting operation.

Touche Ross opened Orange County offices in 1981 with a staff of 22 and also grew rapidly, although it was a relative latecomer to the county.

2nd Acquisition Planned

Massey said Touche Ross is in the final stages of planning a second acquisition that would “round out our real estate services.” He declined to identify the firm.

He said the demand for accounting services is growing on three fronts in Orange County: corporate relocations from other areas of the country, fast-growing local companies and legal accounting.

Touche Ross’ Orange County expansion is part of a broader effort to increase the national firm’s presence in Southern California. Last year, its Los Angeles office merged with Zebrack & Morgan, a West Los Angeles firm specializing in real estate accounting.

Some of Touche Ross’ larger Orange County clients include Coldwell Banker, Toshiba, Far West Savings and BCE Development, the American arm of a Canadian real estate developer.

Touche Ross has a staff of 30,000 accountants worldwide. In 1987, the firm had U.S. revenue of $700 million and worldwide revenue of $1.4 billion.

Partners at other Orange County firms acknowledged that the merger gives Touche Ross a significant presence in the local market.

“This will make them a much more important competitor within Orange County, but it is not without risk,” said Ben W. Perks, managing partner at Price Waterhouse, another Big Eight firm.

Merging an independent accounting firm into a large organization has presented problems in the past. Last year, when Peat Marwick acquired Main Hurdman, several Orange County partners defected over terms of the merger, several sources said.

“Clearly, Touche Ross is buying a professional staff,” said a partner with one of the Big Eight firms in Orange County. “And Touche Ross gives a larger practice base to Coleman’s partners. But they are going to have to integrate their audit philosophies if the merger is to be successful.”

TOP TEN ACCOUNTING FIRMS IN ORANGE COUNTY

Ranked by number of professional staff members

Total Total Professional Staff Staff Members Managing Partner Peat Marwick Main & Co. 280 325 Ronald Merriman Arthur Anderson 200 215 Douglas Jacobs Deloitte, Haskins & Sells 190 230 C. Stephen Mansfield Arthur Young 171 205 Gary D. Johnson Price Waterhouse 150 175 Ben Perks Ernst & Whinney 125 153 Thomas R. Testman Coopers & Lybrand 104 115 Harold Schultz Kenneth Leventhal & Co. 95 125 Michael Meyer Touche Ross 90 105 Chris Massey Coleman & Grant 70 85 Mark Coleman

Source: the firms