Wine Country accounting firms combine and deliver dividends for all involved.
People and relationships are at the heart of business in Napa Valley. “Most business is done around the table, around food,” says Amy Smith of Napa accounting firm Rabanal & Smith. Such discreet dealings made the combining of Napa accounting firm Rabanal & Smith, LLP, and Moss Adams LLP, the West Coast-based certified public accounting and business consulting firm, a surprise to many when the news broke mid-July. “We did it all stealth until the ink was dry,” says Jennifer Rabanal, Smith’s partner in the firm with a roster of clients exclusively in the wine industry.
Despite a year and a half of covert negotiations, when the combination was about to be made public, Smith and Rabanal didn’t want the announcement to catch their clients off guard. So even though the principals had signed the contracts on June 29, they and Moss Adams kept the information under wraps a little longer, thus letting them share the news with their clients personally. It was worth the effort. Smith and Rabanal discovered the people they worked with were happy for them and that the relationships they’d developed over the years were just as important as the services they provided. “Our clients were really receptive, and that was refreshing,” says Rabanal. “It’s a great community.”
That kind of concern for relationships was an important element in the discussions leading to the combination, which became effective August 1. Although business was paramount, shared values and the cultural fit were also priorities, and the two firms appeared to mesh well from the start. “It didn’t seem like we were on different sides of the table,” says Smith.
“It’s a real pleasure to find a firm that fits our culture well,” says Ty Pforsich, managing partner of Moss Adams’ Greater Bay Area Region, who’s been with the firm for 26 years and got to know the two women over several years. He describes Smith and Rabanal as being focused and trusted advisers and, as discussions moved forward, he was confident they’d fit in with the partners at Moss Adams. “It was pretty clear we weren’t going to get so far down the road then find out it wasn’t going to be a good fit for some reason that would surprise us,” he says. “We like them [their practice and clients] very much, and we’re looking forward to smooth sailing.”
“It was about as smooth as it could have been,” agrees Jeff Gutsch, Moss Adams’ wine industry group leader and Napa office partner-in-charge, referring to the negotiations and merger. “A relationship-team-based approach is what we’ve had success with. …You can tell early on, culturally, if it’s going to work. A good fit is a good fit.” He adds that, if Moss Adams had been unable to make a deal to combine with Rabanal & Smith, the company would have looked for its own space to open an office in Napa.
A favorable pairing
Establishing an office in Napa County had been a consideration for Moss Adams for some time. “I look at Napa as a world-renowned wine industry region,” says Gutsch. “We needed to have a physical presence here.” He observes that although the wine industry is important in Sonoma County, it doesn’t dominate the community the way it does in Napa, and while Moss Adams was providing services for Napa clients from its Santa Rosa office, he kept hearing that the company needed to be physically present in Napa Valley, where people like doing business with their own.
As a result, Moss Adams began exploring the concept of opening an office there several years ago. But in 2008, in response to the increasingly weak economy, the company decided to put the idea on hold and sit tight for a while. Eventually, Moss Adams started looking at specialty firms as an alternative, and, says Gutsch, “It didn’t take long for Rabanal & Smith to jump out as a quality firm.” He adds that he’d been talking to Smith and Rabanal for the entire nine years they’ve been in business about the possibility of combining the firms some day, but it was only when the timing was right, almost two years ago, that they started talking seriously.
Rabanal and Smith, who’d worked together previously at accounting firm Motto, Kryla & Fisher, LLP, opened O’Dowd, Franklin, Rabanal & Smith as a four-partner practice in 2003. Eventually, though, one partner left to pursue a career in mergers and acquisitions and one retired, leaving Smith, Rabanal and their staff to carry the load. With fewer partners, they found it a challenge to manage the business and also pursue opportunities for growth.
“We were really evaluating our options,” says Smith, explaining that she and Rabanal didn’t have to make a change, but they wanted to chart the future of their firm. “We wanted someone at a higher level than us,” she says. “Moss Adams seemed like the best strategic fit. It has a value system very similar to ours.” Combining firms also meant reducing administrative responsibilities, which was also appealing. “I think independence is overrated,” she observes. “Interdependence is better for what we’re trying to do.”
“Jennifer and Amy are unique,” says Pforsich. “They’ve done a great job planning for their future,” he adds, observing that thinking about where they’re going in their own professional lives shows they apply the same principles to themselves that they use for their clients. He says they asked astute questions and will add leadership to Moss Adams; he believes the two firms are a good fit because Moss Adams has the infrastructure and systems that will let Smith and Rabanal provide more services to existing clients and bring in new ones. “It was a great opportunity for both parties to get a win-win deal,” he says, adding that he expects the partnership to season with time like a good wine.
History and culture
Moss Adams, one of the largest accounting and business consulting firms in the United States, formalized its wine industry practice in the late 1990s, but has provided accounting, auditing and tax services for the wine industry for 30 years. The firm opened its doors in 1913 in Seattle to serve the fishery, forestry and agriculture industries in the Pacific Northwest, expanded to San Francisco in 1962, then opened an office in Santa Rosa in 1981. And although the company, which is focused on the West Coast, works with wine industry clients in Washington, Oregon and other parts of California, the Santa Rosa office had been the true center of its wine industry practice.
The company’s longevity was an important factor for Smith and Rabanal. “What attracted us was that the firm has been around for 100 years. It’s a strong, solid firm that’s grown at a steady pace,” says Smith. She adds that the company has become a specialist in the wine industry, and because it’s well established, it could fold Rabanal & Smith’s smaller practice into its existing structure. She likens it to a thread that’s woven into a piece of fabric to become an integral part of the whole and says that becoming members of a cohesive team, rather than unrelated pieces of “a patchwork quilt,” was an appealing aspect of combining with Moss Adams. “We kept meeting these people [at Moss Adams] who were so happy with their careers and lives,” she says, and knowing they’d become part of that kind of team played a part in their decision.
Pforsich says Moss Adams values relationships and history too, and he puts Napa’s wine industry in the same class as a business with a long track record. “Napa Valley looked a lot different 100 years ago,” he says, pointing out that some clients have 100-year-old vines that their forebears planted, and they often live in houses that earlier generations built. Similarly, he says, “We’ve been around for 100 years, and it’s important for people to know that we’ll be around for another 100 years.”
One other important element for Smith and Rabanal, who are now partners in Moss Adam’s tax practice and audit practice respectively, was the role of women in the business. They were looking for a firm that retains and promotes women, and Moss Adams easily passed muster, with its support for women and diversity in the workplace, its commitment to ensuring they have equal opportunities and the number of female partners at 24 percent and growing. That policy is in keeping with Napa Valley’s culture, to which Smith and Rabanal have become accustomed. “We work with wonderful men who treat us as sisters and daughters and granddaughters,” says Smith. “It’s all gender neutral. …You don’t see that in other parts of the state. We forget about that sometimes when we go out into the world. It was really refreshing to see that [the people at Moss Adams] walk the walk.”
Opportunities and advantages
As a result of combining, Moss Adams acquires offices in downtown Napa and retains Rabanal & Smith’s six-member staff, giving the firm a physical footprint and immediate connections in Napa Valley, as well as the visibility it needs to capitalize on new opportunities. Moss Adams plans to add staff to the Napa office to bolster its wine industry service team as well as expand to serve other Napa area businesses as well. A project management team began work on integration several months ago, and the working arrangement includes having staff based in Santa Rosa working some days in Napa, and Napa staff going to Santa Rosa. “It’s to make sure we integrate as one firm and take advantage of the benefits of the combination,” says Gutsch.
In addition, although their home office is in Napa, members of the former Rabanal & Smith staff can move around and work out of different Moss Adams offices as required. Smith points to the convenience of being able to set up her laptop and work out of the San Francisco office, which is in the financial district just across from Golden Gate University, her alma mater, when business takes her to the city.
Despite the coveted location and a focus on Napa Valley, the newly integrated office won’t limit its business to Napa. Moss Adams has a client base in Benicia, Fairfield and Vacaville, and combining the firms will provide a more accessible office for Solano County clients, allowing the practice to grow. “It does go beyond the wine industry,” says Gutsch. “It’s a natural fit to build this office into a more traditional Moss Adams office,” He explains that the company is trying to build a Napa Valley business in general, and he envisions working to develop services for the food, beverage and hospitality industries in addition to winemakers and the wine-related businesses it currently serves, such as vineyard managers, coopers, label makers and producers of corks. He adds that synergies involving real estate and the wine industry have been a topic of discussion as well.
While Moss Adams will offer the usual services such as audits and tax advice, Pforsich points out the company can also provide assistance in specific areas. He notes, for example, that substantial capital in Napa Valley comes from outside the country, and specialists at Moss Adams can offer international tax advice and structuring as well as helping clients to expand to other areas of California.
Rabanal and Smith will continue to provide a wide range of services for their clients, in areas ranging from advance tax planning tools to business consulting services such as evaluating the feasibility of expansion and restructuring debt to create a sustainable business level. They believe it’s important to marry financial matters, managerial services and tax accounting so all elements work well together, and their knowledge is such that their clients know to call them before they make decisions so they can avoid doing anything that would be detrimental to their businesses. “The clients are enthused because it makes their life easier,” says Rabanal.
They’re looking forward to the opportunities the combination brings, because as well as having the support they need to serve their clients better, they’ll be able to grow and expand into new areas of practice. “Having Moss Adams come to Napa is great. We’ve always taken a holistic approach,” says Smith, observing that having resources available will be a plus. “It will be nice to have specialists in-house.” She considers business estate planning services an important but currently underserved area in Napa Valley, as people in their 50s start thinking about the transition of their businesses to a younger generation. Moss Adams’ wealth advisers group, which specializes in business succession, can provide expertise in that field, and specialists who research tax laws and put together sustainable business models are among the others she and Rabanal can call upon when they need them.
In addition, Moss Adams has a nonprofit arm that does tax and accounting work, which will provide a service previously unavailable in Napa. “This valley has quite a few philanthropic individuals who have nonprofits,” Smith says, observing that before the two companies combined, those clients had to go out of the area, so a local accounting firm the size of Moss Adams will fill a gap.
Relationships count
“We’re going to continue focusing on the wine industry,” says Smith, adding that, in nine years with 100 percent of their clients in the wine industry, she and Rabanal have gained valuable experience. “It’s given us the opportunity to really know the wine industry,” she says, ”We were taught by some of the most brilliant wine industry accountants out there. We learned quite a lot.”
While knowledge is essential, however, it always comes back to relationships. Pforsich believes they’re especially valuable during significant transactions, because it’s important for clients to have truly trusted advisers who are more than just accountants and tax consultants. Smith and Rabanal fit that description, although they didn’t recognize it until recently. For them, the satisfaction comes from helping businesses and families, especially those in their own community. “It really feels good, when you leave at the end of the day, to know you made a difference for your client,” says Rabanal, a Napa native. “You build those relationships that last 10, 20 years.” That perception might just be one of Rabanal & Smith’s greatest assets for Moss Adams as it embarks on its new venture.
