mergers & acquisitions

partner retirement and the war for clients

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retirement plan label on folderbonus checklist: 8 best uses for a retiring partner.

by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute

once a firm is ready to phase out a partner in retirement, it’s time to move on to the client transition process. but this is the single most abused part of the entire succession process.

more on performance management: best practices for mandatory retirement | how retirement issues affect succession planning | 7 succession questions to ignore for now | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | cpa firm performance assessments: 15 core competencies, 21 questions | what having your employees’ backs means | 5 harmful management attitudes (and how to fix them)

the reason why this part of the process is the most abused is because both sides – the partner nearing mso (henceforth referred to as retiring partners or retired partners) and the remaining partners – are motivated to do the wrong things. for example, it is in the best interest of retiring partners to not transition their clients because if they don’t, the firm will need to keep them around to continue to work on them after mso. if this isn’t bad enough, because they did not transition their clients properly, the retired partners have a great deal of leverage since they are now entitled to their full retirement pay and still have control over some or most of their client base. this allows the retired partners to gain additional benefits from the partner group by basically reselling their clients to them again. unfortunately, this situation is more the norm than the exception.
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dealing with the 16 reasons merging up causes anxiety

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businessman with head in hands

bonus checklist: 12 benefits.

by marc rosenberg
cpa firm mergers: your complete guide

while selling to a larger firm may ultimately be the most viable succession plan available to a small firm, the prospect of the merger creates a great deal of anxiety among small firms nonetheless. the larger firm’s sensitivity to these concerns is critical for a successful meeting of the minds during the negotiation phase.

more on mergers: mergers: assessing compatibility | what to discuss at the first merger negotiation meeting | what to ponder before issuing a letter of intent | want to merge? ask for data | merger prep: getting to know you | looking to grow your firm? how to find a seller in four steps | 13 ways to screw up a merger

why small firms are so anxious about merging up
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8 questions that staff ask in a merger

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group of businesspeople hiding their faces behind question mark signs at officeand 6 steps to handling the process.

by august aquila

to get your employees’ commitment to a merger, they must understand how it impacts them personally and see the opportunities for themselves.

more on leadership for pro members: does your dashboard need fine-tuning? | 6 practical ways to innovate | 8 ways leaders destroy firms | the 4 best ways to use your senior partners | how to tell a culture change is due | today’s top 6 partner compensation trends | why your firm should be a republic | partnership is about persuasion | how to build a growth-centric pricing strategy | how to combine two firms after merger: carefully

let’s assume that the announcement for the upcoming merger or sale is handled properly. in other words, it was not leaked or there were no rumors on the street. you can be sure that once the announcement is made, employees start thinking about one thing – how does this event affect me? this is about self-preservation; it’s an emotional and psychological question that everyone will ask themselves.
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best practices for mandatory retirement

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time to retire clock facethe work retired partners should – and shouldn’t – do if they stay on.

by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute

once “fair” retirement benefits have been determined, for this moment in time, we can move on to the next step in building our succession plan. the reason i mention that we are simply putting stakes in the ground is because as we set additional stakes in the ground, those new stakes might require us to rethink a decision made when setting a previous stake.

more on performance management: how retirement issues affect succession planning | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences

for example, if the firm later establishes premium perks for past owners who want to continue to work for the firm after sale of ownership, then that might require reassessing the retirement benefit calculation agreed to when setting that earlier stake (because in the end, the retirement benefit is about the whole package offered, not just one component).
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mergers: assessing compatibility

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overhead view of people solving a large jigsaw puzzlebonus checklists: 8 questions to answer and 23 issues to negotiate.

by marc rosenberg

these questions can be explored via interviews or group sessions. but they are all great questions that will give insight into each firm’s culture and personality.

more on mergers: what to discuss at the first merger negotiation meeting | 14 provisions to include in a letter of intent | case studies reveal potential loi issues | want to merge? ask for data | the merger process in 21 steps | 13 ways to screw up a merger | 15 can’t-skip merger terms to decide | 14 keys to a successful merger | 13 reasons accounting firms merge | mergers 101: when negotiations aren’t really negotiations | 5 steps to take before merging

  1. why do the firms really want to merge? after the merger, will the firms have the commitment and wherewithal to realize their expectations? acid test: if some of the main reasons for doing the merger are clearly not realized 12 months later, which issues and failures would make you the most upset and frustrated?
  2. how would the new firm be better than the sum of the two individual firms?
  3. do both firms share a similar vision for what the firm should look like in five years? growth, services offered, specialties desired, industries served, number of offices, etc.?
  4. do you share similar values? values include things like how billable a partner should be, how important it is for a partner to follow the rules, the importance of being a business-getter, how staff are treated, work ethic, etc.
  5. each firm should tell the other the following:

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what to discuss at the first merger negotiation meeting

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four businesspeople greeting each othersmaller, larger firms likely have different concerns.

by marc rosenberg
cpa firm mergers: your complete guide

mergers succeed in direct proportion to the effort made by both firms to

  1. ask lots of questions,
  2. agree on as many merger implementation issues as possible before the merger takes place and
  3. openly share as much of their “dirty laundry” as possible to minimize surprises.

more on mergers: 14 provisions to include in a letter of intent | case studies reveal potential loi issues | want to merge? ask for data | plant seeds to turn up merger candidates | looking to grow your firm? how to find a seller in four steps

don’t assume anything. when you sit down for your first merger negotiation meeting:
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how retirement issues affect succession planning

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an old-school bronze justice scale with inequal stacks of moneyif you believe your firm will be dysfunctional without you, now is the time to fix it.

by bill reeb, dominic cingoranelli, and tommye barie
the succession institute

when we take our clients through succession planning, eventually the focus turns to implementing the best practices for running a firm – but first we normally have to start with short-term retirement issues.

more on performance management: succession: the questions to care about | how partner ratings factor into equity | the pitfalls of equity allocation and reallocation | cpa firm performance assessments: 15 core competencies, 21 questions | what having your employees’ backs means

why? because typically you won’t get any buy-in for change until the partners have looked at whether the current retirement system is paying at least roughly a fair market value to the near-term retiring partners.

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succession: the questions to care about

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track and field athletes passing relay baton. studio shot over white.bonus checklists: 5 rules to govern a succession plan. 8 keys to an effective compensation system.

by bill reeb and dominic cingoranelli

we’ve seen a lot of frequently shared, misdirected advice on commonly discussed succession issues. we would rather stop focusing on symptoms and start focusing on resolving the root cause issues that a good succession plan should address.

more on performance management: 7 succession questions to ignore for now | hazards of not reallocating equity | develop your employees or suffer the consequences | how to target what skills to develop now | what having your employees’ backs means

our solution: the robust succession framework

first and foremost, good succession management is a function of good business operating practices. over and over, we find successful firms – including many that have even effectively retired partners in the past – that are overlooking some very important best practices.
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14 provisions to include in a letter of intent

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smiling businessman holding clipboardavoid promising to “negotiate in good faith.”

by marc rosenberg
cpa firm mergers: your complete guide

letters of intent should be drafted cautiously and with as much detail and precision as possible. this avoids potentially fatal misunderstandings or disagreements around key terms later in the process.

more on mergers: case studies reveal potential loi issues | what to ponder before issuing a letter of intent | want to merge? ask for data | one times fees is a steal! | the merger process in 21 steps | plant seeds to turn up merger candidates | 13 ways to screw up a merger | 15 can’t-skip merger terms to decide | 13 reasons accounting firms merge | 5 steps to take before merging

an loi is too often seen as a non-binding jumping-off point, with no real consequences. this is not exactly true. for starters, an attempt by one party to change a material term in the loi can be characterized by the other party as an act of bad faith or a breach of trust, which can
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7 succession questions to ignore for now

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serious-looking businessman in front of empty conference roomthere’s some misdirection in succession management out there.

by bill reeb and dominic cingoranelli
卡塔尔世界杯常规比赛时间 / succession institute

you can’t go a week without seeing some article or blog focused on succession management and everyone seems to have a different opinion as to what is important when addressing succession. so, we thought it was time we challenged some of the more common misconceptions.

more on performance management: how partner ratings factor into equity | hazards of not reallocating equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences | 5 harmful management attitudes (and how to fix them) | do cpa firms need management or leadership?

the first thing most authors want to focus on with succession is the development of future leaders. then the dialogue will shift quickly to mentoring programs, leadership training and more. well, it would be hypocritical for us to disagree with this because we actually develop and conduct these kinds of programs. however, training such as this is only valuable after many other issues are addressed first. so, while it is important, i guess the best phrase to describe this is “first things first,” and this is not first by any stretch of the imagination.

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case studies reveal potential loi issues

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model train derailed as model workers look on8 ways to drive a merger off the rails.

by marc rosenberg
cpa firm mergers: your complete guide

as you will see from reading these examples of issues i have seen arise at second meetings, touchy or sensitive items are much more easily dealt with before the letter of intent is prepared than after.

more on mergers: what to ponder before issuing a letter of intent | want to merge? ask for data | merger prep: getting to know you | one times fees is a steal! | the merger process in 21 steps | 13 ways to screw up a merger

the discussion at this second meeting steers the parties closer to a mutually acceptable transaction in the direction that the seller is looking for, thus minimizing contentious issues that often arise when an loi is issued that amounts to a “stab in the dark” by the buyer.

here are some agenda items for second meetings i have recently led:

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nine factors for dividing the partner pie

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cut pie chart on plate flanked by fork and knifehow to decide who gets how much voting power.

by bill reeb and dominic cingoranelli

people who can lead, develop, train and supervise others are worth much more than those who can just make themselves faster, better and stronger.

equity ownership allocation is a critical success factor if you expect your firm to continue after you leave.  for many firms, reallocation of equity ownership is or will be an important part of succession planning.  while it can cause some anxiety for your owners’ group as you go through the process, it’s better to confront the issues now, to help ensure that your firm is in good hands after your leave. it’s not necessarily easy, but it must be addressed for long-term success.

more on performance management: hazards of not reallocating equity | the pitfalls of equity allocation and reallocation | develop your employees or suffer the consequences | cpa firm performance assessments: 15 core competencies, 21 questions | do cpa firms need management or leadership?

when you are deciding which partners should have more say (or less say, which is just as important), you need to consider issues such as whose judgment partners trust, who is pulling the wagon, who consistently acts in the firm’s best interest, or who is viewed as a current or future leader. with this in mind, here are nine areas to evaluate or each partner: read more →

what to ponder before issuing a letter of intent

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generic business letter of intentthe difference between the first and second meetings.

by marc rosenberg and peter fontaine*
cpa firm mergers: your complete guide

for now, let’s define the letter of intent as a written offer made by the buyer to merge in or acquire the seller. (a thorough definition is given later in this post.) it is a relatively short, simple, non-binding offer, subject to

  • further negotiations,
  • performance of due diligence and
  • a formal vote by the buyer’s partners.

more on mergers: want to merge? ask for data | merger prep: getting to know you | one times fees is a steal! | the merger process in 21 steps | looking to grow your firm? how to find a seller in four steps | 13 ways to screw up a merger | 15 can’t-skip merger terms to decide | 14 keys to a successful merger | mergers 101: when negotiations aren’t really negotiations | 5 steps to take before merging

before the loi is prepared

the first meeting was the “get-to-know- you” meeting. the purpose of this meeting was simply to introduce each firm to the other, give each a chance to “kick the tires,” get a feel for the personality and style of the other and to share some very basic information, all of which is designed to help each firm decide if they wish to go to the next stage. read more →