start planning years, not months, ahead.
by joel sinkin
transition advisors
every week we hear about another merger or acquisition.
there are many reasons firms consider merging.
the most common objectives follow:
- talent is in short supply in today’s marketplace. many firms are using mergers to add talent for growth and/or a tool to build an internal succession team for the long-term security of the firm.
- cross-selling niche services: we are seeing firms entertain mergers that create strong cross-selling opportunities.
- growth from having a larger platform of services, increased capacity and through the addition of the clients a merger brings.
- marketplace refers to mergers that provide the successor firm a flag in a new harbor.
- succession: a strong percentage of accounting firm owners are seeking to reduce their time commitment to their firm so succession remains the number one driving force of most small firm mergers.
making your firm more attractive
for firms considering an upstream merger, having updated technology, strong metrics and clients, a youthful staff and quality work can be just some of the keys to standing out.
for the firms that hope to be the successor entity, your owner agreement will be a key aspect of what makes your firm more or less attractive. you will need to show how a merger will create and reward the growth to the new owners and succession for near-term retiring partners.
a key in making your merger successful is focusing on the 4 c’s:
- chemistry: our main rule is if you don’t want to eat lunch with someone, don’t merge with them. if you are not comfortable with someone why would your clients and staff be?
- capacity: if you are performing a merger for succession, the successor firm must have both the skill set and capacity to replace you.
- continuity: your clients and staff like the way you are running your practice. if the successor firm is going to need to make wholesale changes that will greatly alter the client and staff experience, you need to be careful as it could hurt retention.
- culture: this concept can be defined many ways. a quick initial due diligence regarding culture is learning what it is like to be an owner in the firm, a staff person and a client.
when should a firm seeking succession start the process?
smaller firms and many large firms’ clients are “partner” loyal as opposed to “brand” loyal. partner-loyal clients naturally take longer to transition than brand-loyal clients. what mitigates this issue further is that in 2018, we are communicating more with our clients than ever, but most of those communications are by phone, email, the cloud and portals as opposed to in person.
most accounting firm owners only see their clients in person once a year. if you fall into that category and want to retire in three years, don’t think in terms of three years, think in terms of three visits. that is why a strong transition plan frequently takes three to five years to secure success.