How to Successfully Merge in a Small Firm

Mergers are all the rage.  Retirement-minded Baby Boomer partners are looking for an exit strategy.

Fueling the fire are buyers (any firm larger than a seller), hungry to achieve double digit revenue growth.

Many of today’s buyers are inexperienced with mergers.  As a way to help these “newbies,” here are 16 pointers for making your next downward merger a successful one:

1. The top 3 keys are culture and personality fit…times three!  This is obviously less important if the seller will not be working for the buyer.
2. Don’t expect a cakewalk.  Sellers will be high maintenance and will be experiencing huge changes to their lives.   Buyer needs to understand that “this will take a lot of work.”  Be patient with transition; mergers take 3-5 years on average, to be fully assimilated.
3. Due diligence review of reports, returns and workpaper files to determine if (a) the work is up to standard and (b) if work is not up to standard, can you make money with the additional work that you will have to do, given the fees the seller charges his clients?
4. Thorough review of the seller’s financial statements, production statistics and operations.  I have experienced many cases where initial conversations with a seller were quite positive, only to be stunned by glaring inconsistencies between how the seller described his practice and what his numbers indicated.
5. Compatibility of billing rates.  On the one hand, if a seller’s rates and fees are low, it’s a great opportunity for the buyer to improve profits by gradually getting the rates up.  But if the gap is too big between the firms, it may not be feasible to bridge this gap.
6. Find out what the seller expects from the merger.  Conversely, understand what you, the buyer, expect from the seller.  Define the seller’s role with crystal clarity, including expectations for practice development, billable and total work hours.

Click on the link for a list of all 16 Ways To Successfully Merge In a Smaller Firm.

Our monograph CPA Firm Mergers: Your Complete Guide taps into Marc Rosenberg’s 20 years of experience choreographing dozens of mergers.  This monograph is double the size of the original and contains much more material because it’s more of an “A to Z” game plan.