Akron-based accounting and business advisory firm Apple Growth Partners has merged with Fargo, North Dakota's Eide Bailly. AGP, which through a strategic effort by Chairman Chuck Mullen grew to become the 18th largest accounting firm in Ohio, will see its 24 partners and 125 staffers join Eide Bailly's 3,800-person team.
Chuck and tax principal Jeff Brooks talk about the deal and all that's led to it — from both joining Apple Growth Partners after its acquisition of Brott Mardis back in 2008, to how their recent conversation about ChatGPT ultimately sparked the firm's sale.
What follows is a transcript of the conversation, edited for clarity:
Adam Burroughs: On June 24, Apple Growth Partners, an accounting and business advisory firm for which you, Chuck, are chairman and Jeff, you are tax principal, will go from reportedly the 18th-largest accounting firm in Ohio to part of Eide Bailey, a Fargo, North Dakota-based firm, which is ranked 20th on Accounting Today's 2024 list of the top 100 firms.
And from what I understand, this was essentially kicked off after you, Chuck, had an encounter with ChatGPT. What's the connection?
Chuck Mullen: Great question, Adam. Yeah, it's, it's funny how simply these things get rolling, right? So, coincidentally, the guy joining me on the show today, Jeff Brooks, who I've worked with for 19 years — Jeff, you probably remember this — you and I were having breakfast in January of 2023. And you said the words ChatGPT to me. It had been out for a little bit. And I said, ‘What the heck is that? Can you say that again?’ I thought the marketing, the branding was terrible. How am I going to remember ChatGPT? But once he told me what it was, I was obsessed.
I went home and I started working with it. It was free, of course, just like everybody was using free ChatGPT, but I realized that technology had made a quantum leap. It wasn't surprising, we knew that was coming. We just didn't know when. And I saw that, and I said to myself, ‘Wow, the world has progressed very, very quickly. It's going to keep progressing very, very quickly in this realm of technology. This is just the tip of the iceberg.’
I mean, this is their beta or whatever they're putting out for the public to play around with. What else is coming? That's what led me to believe that if we are to be a competitive company, we're going to have to invest a lot of money quickly to not only understand and harness this technology, but then utilize it in our business to be competitive with our processes, our procedures, filling the labor gap, all that good stuff, but then also taking it to our clients because other accounting firms, I had that light bulb moment: other accounting firms are definitely going to do that. And guess what? They probably already have started.
So I was left with a little dilemma there. Do we invest the millions that I think it would take — for a firm our size, there's a fixed cost of entry of getting into the technology game — do we spend that money? Yeah, we'd spend it. Sure, we'd do it. But would we know that the outcome would be good?
I'm not a technologist. And I realized to play with that level of money in a firm our size and get the technology right, was a big roll of the dice. I'm okay taking calculated risks and I've done that my whole life, but this was a risk I was not willing to bet the farm on. That started my journey of saying, ‘We may need to lock arms with a larger firm, larger company that is already figuring this out.’
Adam Burroughs: Jeff, what did you see in ChatGPT? Was it something that you saw that was germane to the firm? Was it just interesting? Why bring it up that day? What did you see?
Jeff Brooks: I just really thought it was a very interesting technology and I know Chuck's got that forward-looking visionary personality. I just thought he'd be really interested in what it could do.
I like to see how things progress. So I was excited to see where technology had come from. You've got your Google search engine, which gets a lot of information at your fingertips, but ChatGPT was taking it and creating something with it. I was, I was pretty impressed with it.
I didn't immediately put together that it might affect accounting firms like Chuck did, but I just thought it was a very interesting technology and thought that it would be just kind of an interesting conversation around it. But as we talk more about it, it really is going to change the world and there are going to be different iterations that are going to be applicable to business, different parts of our business. We're starting to see it more and more.
Chuck's been my mentor for a number of years, and as we've had conversations, he's kind of seen into the future on some trends and I think he's been pretty right on this one, that it's starting to change in the accounting world as well.
Adam Burroughs: Both of you have sort of seen the full spectrum of M&A. To start, both of you have been on the acquiree side of M& A before. Both of you were brought over to Apple Growth through the merger with Brott Mardis. Thinking back to that event in 2008, Chuck, what did it feel like to be in the position of acquiree?
Chuck Mullen: Well, in 2008 it was frightening as can be. At Brott Mardis, I actually interviewed and hired Jeff in 2005 as an intern. So we had worked together for about three years before the firm we were in merged into Apple Growth Partners. We merged in on 1/1/08. Everybody can do the math and say, ‘Wow, that we remember 2008, 2009.’ We may have been the last company to merge in five years at that point.
But it was scary for other reasons. I was a lot younger and didn't know what I didn't know. I was just early enough in my career and Jeff was really early in his career where I had helped clients tangentially with some mergers and acquisitions. I knew I liked it, but I didn't really know enough to really be doing what we were doing there.
There was a lot of trust. Thank God that trust worked out OK. But I would say it was about a year of anxiety, only because I really didn't know what it was like. It was all new territory and it was new territory in the midst of the greatest recession we've had in in years. So, I would call that a feeling of pure anxiety because of lack of knowledge and because of when it was.
Adam Burroughs: You were yet to be in that C-suite circle, I believe, when you were with Brott Mardis. What was the communication like? Did you know what was coming? Did you have your suspicions? From that position, what was it like?
Chuck Mullen: Well, interestingly, I actually was in the C-suite, but very early in the C-suite. In many regards, I did architect the whole thing. I did drive that merger. There's no doubt about that. I drove it to conclusion with Apple Growth Partners. Like Jeff said, I do have these visions and I had a vision that it was the right thing to do at the right time. I didn't quite know why it was the right thing to do at the right time, but I just had this feeling that we needed to do this.
That did turn out to be the right decision because the Great Recession would have pummeled that little firm we were at. But two, it was the same feelings that we have now that we just were too small to compete at that time that. Somehow I just had this feeling that Brott Mardis had exceeded its shelf life.
I think the fact that we merged like days before the Great Recession started — call that dumb luck. Because nobody would have wanted to acquire us once that recession got started.
It was more of a feeling of, we were not competitive. We had great people, but something was just causing us not to be able to get newer and great clients.
Adam Burroughs: Jeff, you were in that position of associate when the Brott Mardis merger happened. Can you explain from your perspective what that was like for you?
Jeff Brooks: As Chuck mentioned, I started in 2005 and I really liked that firm size that we had. It was about 30 people. It was, you got to know everybody. It was like a family and really great for starting your career.
But as Chuck mentioned, you could see there was kind of a ceiling there that you wouldn't be able to maybe do all the things you wanted to. I didn't have any inside knowledge or anything, but when news came out about that we were merging with a larger firm, I was actually pretty excited about it because I was going to get to be around new service offerings, people with a different perspective. It was going to allow me to expand my career, my capabilities, and just meet a bunch of new people.
We hadn't really offered business valuations like we do now. So Apple Growth Partners had a full valuation team. I got to get in, really understand that offering and how that could benefit our clients. I really enjoyed that experience. And there's other ones.
We then got to know the folks at Apple. We grew with them and I kind of have a similar feeling about that with Eide Bailey now that they've got service offerings that we just didn't have. They've got experts in certain tax credits that we didn't have. They've got folks in other states that we're not in and experts in those local state taxes. We'd be helping our clients with them and we'd get it resolved, but they can bring a different level of expertise.
Then they've got an investment banking focus, which is an extension of something that we do. So I'm excited to be able to bring all those services to our clients. I think it's just the right time to be able to do that. I think there's something to be said for having scale at this point in the economic cycle. I think things always kind of go in cycles. There will be consolidation. And then maybe at some point, folks will break into smaller firms or boutique firms that can handle certain things. But I think right now you want to be at a point where you have scale and resources to be able to bring to your clients.
I'm excited, even more now. I was involved heavily in this deal. I got to see it as it was going through. That gets me excited about the future. I think if you do these things at the right time, and we took a lot of careful consideration to make sure it was the right time, I think it just gets everybody excited. I'm seeing that with some of our staff and managers that they're having some of that same excitement that I did.
I feel like if you're doing something for the right reasons, it gets people excited, even accountants who are generally on the lower end of the excitement spectrum and they're adverse to change and that type of thing. But if you do it for the right reasons, it can get people really excited. I've got some of those same feelings of excitement that I had, you know, back in ’08, ’09 as I do now.
Adam Burroughs: Chuck, you progressed with Apple Growth after you came over. You became chairman and around 2016 you began to pursue your plan of doubling the size of the firm by 2020. That began with the acquisition of KPFF of Beachwood. What did you like about KPFF? And how did that process of being acquired with Brott Mardis inform the process of acquiring KPFF?
Chuck Mullen: Well, it's such a powerful question Adam. I love the cadence and the direction you're going with this because there is so much back story to where we to where we got today
First of all, I want to say that, we met Apple Growth Partners in late September of 2007 we were merged by January 1, 2008. I mean, you talk about breakneck speed. I make a lot of decisions based on gut instinct. Somewhat calculated, but gut instinct.
When I met Dave Gaino at Apple Growth Partners, I knew that he would have an invested, visceral interest in our success. That's very important. Some firms, when you talk to them, you can just kind of pick up on a micro signal that maybe they're putting forth their best foot so you'll sell and then they're going to move on to the next one. I never got that feeling with Dave Gaino and I turned out to be right.
These were the most ethical, loving people that we could have possibly merged with. Great culture. That just all worked out. Then all the mistakes you made in that three months of rushing the merger, they worked themselves out because as you found this problem or that problem, you could actually have a conversation about it.
Then we go through the recession and all that. I was head of the tax department. Fast forward eight years, I do become chairman. And in that time, my practice has grown, my personal practice within the firm, and I've done a lot more transactions with clients. I'm a little older and more well versed with M&A and I still love M&A.
I said to myself. You know, you ever hear, Adam, when someone builds a house, they say, ‘Gee, I wish I could go build another house now because now I know all the mistakes I made.’ Well, guess what? I was ready to be the acquirer because I could go to these firms and say, ‘Listen, we're going to be partners after this. I'm going to negotiate on your behalf, even though you're negotiating with us because I don't want you to go through the anxiety that I went through my first year when I just didn't know what I didn't know.’ And in that regard, it was fulfilling. I think it resonated with firm. So I met Bob Neides at KPFF and I was just so excited to tell him, ‘Hey, come join us.’
And I said, ‘Bob, here's what we're going to do. You and I are going to write the letter of intent together. We're going to write it. We both have great attorneys that work with us, but I really don't want to get the attorneys involved until you and I have agreed on a boilerplate LOI.’
We spent six weeks, Bob and I, one on one going back and forth. He was starting to find things that were unfair to us and I was starting to find things that were unfair to him. We find out we're negotiating for each other, right? We're getting this right. By that point, you give it to the attorneys and say, ‘Make it so please. This is what we want.’ And that just worked so much better that way.
And then Bob Neides came on and, yeah, we stubbed our toe a lot integrating him. But then six months later, we merged in another firm called Schlabig. We had learned a lot of what we had done wrong from there. What we'd done wrong with Rob Martis. We're just correcting ourselves. I know you just asked about KPFF, so I'll just keep it at that, but it had its issues, but it turned out to be a tremendous merger for us and got us into the Beachwood market, which is where we wanted to be.
Adam Burroughs: Since that KPFF merger, the firm continued to grow through additional mergers. You added offices, you had a presence beyond your home base in Akron to include Canton, Charlotte, Cleveland, Chicago, Schaumburg. 125 staff, 24 partners as of today. How did that growth affect the firm?
Chuck Mullen: Well, I will say it was hard on the firm from a throughput standpoint because it seemed like every six months I was telling people, ‘Hey, guess what? We’ve got to integrate 3,000 more tax returns into our system and this guy or gal is going to need some help with the returns that we just acquired’ and so forth.
But I will say this, we kept our turnover at an industrial rate. It's not like it was so bad that people were running for the door. Our turnover stayed normalized throughout that process.
The first three months after a merger, it can be hard on everybody — maybe even six months after, it can be hard on everybody — because you're not sitting still. You just kind of got your act together and you feel like, wow, I've got my schedule set and I know what I'm doing. All of a sudden, here comes Chuck again. We're acquiring another firm and they're going to need some help.
I would say it was hard for everybody, but I would say it also drastically improved our culture because I think your culture improves anytime you can add more people that work like you do, think like you do. I always say it's like I got more friends. Do a merger. Guess what? I just got 30 new friends. I don't think it's any accident that we started to win a lot more employee awards after we started our acquisition parade. So I don't think there's any accident about that at all. I think it improved morale, but it was harder work.
Adam Burroughs: Jeff, from your perspective, you were looking forward to raising the ceiling. More opportunity because of adding capabilities, adding people to learn from, to grow from. During that period, from your perspective, what did that feel like?
Jeff Brooks: I thought it was really kind of an exciting period. I think in public accounting, that's kind of part of the fun of public accounting. You're doing a lot of different things. You're getting involved in a lot of different things. I generally like seeing something new, tackling a new problem, coming up with new solutions. I thought, all that was really right up my alley, that we were trying new things, we were getting outside of our comfort zone, we were pushing ourselves. I felt it very enjoyable, exciting and wanted to continue that ride.
But I think we did it in a way that made it work for as many people as you could. Not everything's going to work for everybody, but we really did take into account that we want to bring in people that are going to mesh well with other people. Then it's going to keep that feeling of enjoyment and we're going to get through this together.
I think that you can call it culture and culture kind of ebbs and flows. You don't have the same culture all the time. But I think we really tried to look at are we going to be around people that do have similar kinds of thought process. They serve similar types of clients. If you do that, then you've got a similar background and you're almost like in the foxhole together. You're like, let's figure this out when you do, everybody's excited about it. So, I thought that we really got a lot of people on board with the growth and the plan to do different things.
I think that's, that's tough for accountants in general. I mentioned that earlier, I give our leadership team a lot of credit for navigating that and make it exciting for people. When you get excited about it, it turns into being fun and just kind of kind of builds on itself.
I think we did a good job of making it fun. You don't want to be too technical about it. Chuck was mentioning about the legal agreements. You got to have those buttoned up, obviously, in a deal, but you don't want to start with that. You want to start with making sure are we doing the right business decision? Are we doing right by our people? By our clients?
I've been involved in advising on a lot of deals. I've been involved in our own deals. The ones that work really well, the business decision behind it made a lot of sense.
Bringing it back to the Eide Bailey deal, when we met with their partners, did our due diligence, the big thing for me was, are they serving similar types of clients? Are our clients going to fit in well with them? Is our staff going to fit in well? Are they going to have more opportunity? Are they going to be able to have the careers that they want to?
All that really lines up that it’s probably the right next evolution. We could have done another deal and acquired somebody else, and we were looking at that. But us getting acquired is the right evolution really for our employees to be able to take it to the next level, which is what got me excited, and I think that's always been our focus.
Your question about there's a lot going on and how do you balance it, I think that's how we did it.
Adam Burroughs: Chuck, with this move to Eide Bailey, you’ve become part of a much larger firm, reportedly some 365 partners and approximately 3, 800 staff. Even though, as you've said, the two firms share the same values, your place in the combined companies change. What about that shift makes you optimistic and in what aspects might it take time for you to adjust?
Chuck Mullen: I'm going to be going from being chairman of one firm to being the regional market leader of a larger firm. I couldn't be more excited. It's so important to me that our people and our clients have a bright future with us. And as the leader of our firm, I have to be able to deliver to both our employees and our clients. They have to have a bright future. And it wasn't just ChatGPT, but other developments out there, such as a lot of offshoring that's occurring and so forth. It's changing the tapestry of our industry.
I knew that at some point if we were going to be able to promise a brighter future to clients and employees. We're going to have to lock arms with a larger firm. The question becomes, how do you find a larger firm that’s like you, that your people are going to integrate with.
I've always felt so comfortable with Eide Bailey and because of that, I'm totally fine having a role — actually the tasks of my role are very much like they are today at Apple Growth Partners. What's kind of ironic is, I've been acquired. I have acquired. I'm getting acquired. And as soon as we get acquired on June 24th, first order of business, start acquiring again.
My job is to grow, the Great Lakes region east of the Mississippi as market leader. But so much of that is going to be mergers and acquisitions. I'm as happy as a pig in mud right now. I get to continue doing all the exciting things that got me out of bed every day and got me energized at Apple Growth Partners. Different title. Obviously, I'm not the CEO of Eide Bailey like I am of Apple Growth Partners. That's totally fine. It's a winning team. We love to work with winning teams and people that are going in the right direction.
The other thing I will say about Eide Bailey, having been through so many mergers and acquisitions with clients, the one thing that I would say makes them different than any company I've ever met before is how hands on they are. Almost an old-fashioned way of doing business that you don't see too much of anymore, and you really don't see it when a company gets as big as they are. I honestly haven't figured out how they do it yet, but so many meetings are in person, even though they’ve got to come so far to see us.
Everything is very carefully done. Conversations are very carefully talked through, nothing's rushed. It really is kind of an old-fashioned way of doing business and I think it's a part of their charm and why Eide Bailey has been so successful.
Adam Burroughs: Chuck, for those who are facing a similar realization as the one you had that kicked off this process, what advice would you offer on how to make such a major business decision?
Chuck Mullen: First order of business, if you feel that way, you’ve got to follow it. Two, I would put yourself on a time frame to either say, ‘I'm going to continue following this or I'm not.’ For me in particular, I'd make that timeframe three months. That's kind of what I did.
When I started calling larger firms to see if we should be doing something, it was just research only Adam. That's all it was. I wasn't looking to be acquired, but I gave myself a timeframe and said, I'm going to start these calls in August or whatever. By November, we better have a decision whether we're going to stay independent or we're going up.
So I'd give yourself a time, and I would be so, so, so careful. Do not get absorbed in the paralysis of analysis. That to me kills forward momentum because it is such a momentous decision. However, if you have crossed that three-month mark and you have decided more than 51 percent of your information is telling you that you should merge up, then you got to merge up. You're never, ever, ever, ever going to have perfect information.
You can only do your best as far as determining, do I like these people? Is this a good deal? What you can do though to make the risk more of a calculation is you have friends in the marketplace. You have consultants. You have people in the marketplace that love and care for you. Have them meet with them. Have them talk with them. Get their opinion. You don't have to make this decision on your own.
I think that can be a real deterrent to people moving up is they're so darn secretive about it that they operate in a vacuum and they put all this pressure on themselves to be able to make the decision themselves. Sometimes if you have a friend out there or a consultant of the company, sign them to an NDA, sign them to something and say, Hey, listen, this is something we're looking at. You're going to sign this NDA. We want you to talk to him too. Tell us what you think. And you can tell him, Hey, listen, we're, we may not do this. We may not do this. We're just talking. We're not making any declarations, but get a little bit of outside help from your brain trust.
Then I would set a goal of making the decision within three months of yea or nay of whether you're going to do it or not. Then I'd give yourself six to nine months of doing it. If you don't go at that pace, what you're going to do is eat up a lot of your valuable time, other people's valuable time, and you'll have really gotten nowhere.
