merger

bonus 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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smaller, 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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avoid 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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8 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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the 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 →

bonus checklist: 17 data points you should exchange. and don’t forget the client list.

by marc rosenberg
cpa firm mergers: your complete guide

i have always been a big believer in the buyer and seller exchanging financial and operating information as early in the process as possible. numbers aren’t everything, but they do speak volumes. the data enables each firm to gain an understanding of the other in a manner that is not always possible in conversation.

more on mergers:merger prep: getting to know you | one times fees is a steal! | the merger process in 21 steps | plant seeds to turn up merger candidates | 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 | 13 reasons accounting firms merge

the data is also a good way to corroborate things that are said verbally.

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