One advantage of a merger is access to new talent.
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A carefully thought out and executed merger with another accounting firm can reap you and your partners huge rewards. Gaining economies of scale and expanding into niche markets are some of the advantages of combining accounting firms. However, while some accounting firm mergers are successful, others fail for such reasons as poor retention of staff and clients and cultural differences.
Advantages of a Merger
Combining a small one- to two-partner CPA firm into a larger accounting practice is commonplace. The successful merger of your accounting firm with another practice results in a potential benefit of scale, access to new markets and niche services. If you run a small practice, merging with a larger accounting firm expands your client base, bringing more money to you and the other partners. If you plan to acquire a small CPA firm, the opportunity to bring on board income-producing partners and other talented staff is another advantage and reason to merge.
Disadvantages of a Merger
The saying "bigger is not always better" is particularly true for many accounting firm mergers. One major disadvantage you face should you decide to merge with another practice is client retention. A client may feel lost in the shuffle of the merger and take her business elsewhere. The same applies to staff. Partners, junior accountants and other staff may leave if they believe there is no place for them at the combined firm. This could all result in lost business, particularly if you do not have an integration plan in place.
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Why Mergers Fail
The "Journal of Accountancy" offers several reasons why CPA mergers fail. Ego or the unwillingness of partners to adapt to new changes is one; a poorly thought out and communicated firm name is another. The cultures of the new combined accounting practices may sink the merger, and the introduction of change too quickly can scare off staff and clients. Failing to have a succession plan, particularly for exiting partners in a timely manner, leads to inadequate capacity. A merger plan also must transition staff to their roles in the combined firm or face the risk of losing them. Failure to integrate technology can sink a merger, as can poor communication and transition planning. Impatience is another reason why CPA mergers fail.
Insight
Combining firms merely to fill empty office space, spread technology costs or utilize excess staff may not be good enough reasons to proceed with a merger. Human emotion is an important component in merger decision, and a merger should feel like a win-win for both sides. Many people find change disconcerting, and your firm's culture may not mesh with that of the other CPA firm. If that is the case, communication with the staff on both sides helps to manage expectations of all parties involved. Clients also need to be made aware of upcoming changes in a reasonable amount of time, particularly as they relate to fees and billing hours. Springing new fees on acquired clients may turn them away. The merger deal should contain a client retention adjustment to keep the selling partners motivated.
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