Mergers continue to be a hot topic among partners at CPA firms. For many niche firms a merger or acquisition is a great way to deal with succession or growth concerns. Activity has ramped up over the past few years and it looks like it will continue through 2016.
Larger firms have a real advantage in acquisitions. Their size can hide many sins. A large CPA firm can absorb the smaller one and continue on even if there are integration issues. Similar to the way the New York Yankees are able to eat a bad free agent contract.
Niche firms don’t have that luxury. They have to plan and prepare to ensure the transition is smooth and client relationships, and profits, are not disrupted.
Once again it’s time to remember the famous words of the great boxer and philosopher Michael Gerard Tyson: “Everyone has a plan until they get punched in the face.”
Niche firm generally merge to create a new geographic presence – a firm from the south wants an office in the northeast – or, to expand or create new services in an existing practice.
There are three areas niche firms should focus on to ensure a smoother transition and to potentially duck an unforeseen punch:
- Technology: Once you merge your technology stack has doubled. Many plan to keep everything separate until the details can be worked out. Too often this results in maintaining both technology stacks far longer than is warranted. Technology should drive everything you do in tax and audit. It is the key to scaling and profitability. Make it a priority.
- Knowledge Transfer: The new, merged entity will possess more knowledge assets. These assets, likely people based, need to become part of the institutional knowledge of the firm. Put the technology and resources in place to make this happen.
- Methodology: The simple fact that both firms have a methodology does not mean one should be the standard for the firm moving forward. This is an opportune time to leverage the increased knowledge and experience and reap the economies of scale. Isn’t that why you merged in the first place?