PERSPECTIVES

Accounting firmsbid for high techbusinessFrom Route 128 to Silicon Valley, ma-jor international accounting firms aresetting up satellite offices to courtsmall high technology companies. Theaccounting firms have even createdunits that deal only with these compa-nies, offering them specialized ser-vices and, in some cases, discountedfees.

"We view these companies as a ma-jor growth opportunity for the firm,"says Cheryl Suchors, director of Coq.pers and Lybrand's National HighTechnology Industries Program,which has increased the number of itsclients LLliVo annually for the pastfrve years. Other firms also report rap-idly growing practices.

The accounting firms offer each hightech client custom-tailored servicesthat go well beyond auditing 6nd taxplanning. For example, an accountingfirm may begin working with a start-up in formulating a business plan, saysDavid Ellsbree, managing partner ofthe High Technology Industry Groupof Deloitte, Haskins, and Sells. Thefirm can arrange introductions to ven-ture capitalists through its vast net-work of contacts and can consult onsuch alternative means of financing ascorporate partnerships and licensingagreements. After Brooktrout Tech-nology (Wellesley, Mass.) failed to hndventure capital to back its voice mailsystem, for instance, the Deloittegroup helped arrange a joint development venture with a dealer of businesstelephone equipment.

Accounting firms are also involvingthemselves in high tech marketingneeds. Coopers and Lybrand, for exam-ple, works with firms on integratingmarketing, R&D, and production for amore efficient operation, says Suchors.And because companies in high techindustries are likely to go offshore rela-tively early, the major accountingfirms advise them in such areas asinternational tax planning and settingup foreign sales offices and manufac-turing plants.

Another important area of consult-ing is personnel and compensation-serious issues given that high techhrms consider employees among theirmajor assets. For example, should thebusiness offer its employees equity?What kind of benefits package isappropriate?

The accountants' aim is to nurtureclients that may someday request ma-jor services such as those required for apublic offering of stock. "Our payoffcomes when a client becomes a bigcompany and needs an audit everyyear," says Deloitte's Ellsbree. Thushis group is "discounting fees signifi-cantly for start-ups" in hopes that "ahandful of them will turn out to be thenext Digital or Prime."

The small high tech companies, inturn, can benefit greatly from the bigaccountants' advisory services and fi-nancial connections. For example, thebig firms have on tap an array of na-tional and international specialists,which is particularly useful to a com-pany doing business in more than onestate or eyeing export markets, saysJack Rennie, president of Pacer Sys-tems (a Burlington, Mass., instrumentmaker) and former president of theSmall Business Association of New En-gland. Most important, he says, anaudit by a large firm is practically anecessity for venture capital or publicfinancing.

There are questions, however, about

whether the Big Eight always measureup to their reputations. For example, alarge accounting firm's discounted ser-vices to a small company might behandled by ajunior accountant cuttinghis teeth, claims Jeff Weiss, director ofthe Southern California High Technol-ogy Executives Network. According toRennie, moreover, there is a fairlyhigh turnover rate among the bigfirms' staff accountants, and it can behard for a small client to get his bigaccountant's attention. Some observ-ers also fear possible conflict of inter-est when the relationship between an'accounting firm and a high tech com-pany is extensive. Hearings beforea congressional subcommittee haveraised questions about the indepen-dence of an audit done by the samefrrm that consults for the company,although the accounting firms claimthat they will not be compromised.

There is also the problem of the bigaccounting firms' encroachment onwhat had been smaller firms' turf, saysAnthony Krzystofrk, a professor of ac-counting at the University of Massa-chusetts at Amherst. The small ac-counting firms have traditionallyplayed an important role in emergingindustries by providing start-up com-panies with patient, attentive service.But "if the big firms drive out the littleguys," he says, "who is going to workwith the next generation of entrepre-neurs?" E -David Ludlum

Big Eight move into,high tech

Arthur Anderson & Co. Small Business and Growth lndustries Division, Ste-ven J. Appel, 69 W. Washington St., Chicago, lL 60602, (312) 580-0069.Arthur Young & Co. High Technology lndustry Group, G. Steven Burrill, 1 PostSt., San Francisco, CA 94104, (415) 393-2700.Coopers and Lybrand National High Technology lndustries Program, CherylSuchors, 'l Post Office Sq., Boston, MA 02109, (617) 574-5000.Deloltte, Hasklns, and Sells High Technology lndustry Group, David Ellsbree,28 State St., Boston, MA 02109, (617) 742-7660.Ernst & Whlnney Privately Owned Business, John McCafferty, 200 ClarendonSt., Boston, MA 021 16, (617) 266-2000.Peat, Marwack, Mltchetl & Co. Private Business Advisory Services, HowardN. Miller, 345 Park Ave., New York, NY 10154, (212) 872-5840.Prlce Vaterhouse High Technology Group, James S. Coriston, 121 Park Cen-ter Plaza, San Jose, CA 951 13, (408) 275-9671.Touche Ross & Co. High Technology/Emerging Business Group, Alan Gold-stein, 'l Federal St., Boston, MA 02110, (617) 426-5151.

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