Archive for the ‘Mergers’ Category
Friday, December 2nd, 2016
“To this day, I don’t like people walking on stage not looking good. You have to look good. If you feel special about yourself then you’re going to play special.” – Benny Goodman
Are you a smaller firm or are you looking for one to acquire?
Here’s something to think about from the recent AICPA Private Companies Practice Section and Succession Institute LLC survey:
Considering that our profession has roughly 44,000 firms, with about 600 having 21 professionals or more, we believe that the merger market for small firms is about to heat up in the short term, and the marketplace is likely to get very soft towards the end of that five-year period because of the increase in the number of firms in play.
If you think you will “merge up” when the time comes, you better get your house in order.
I have the good fortune to work with many smaller firms and these firms are focused on streamlining processes, training, technology and profitability no matter if they intend to remain independent or are preparing to merge up.
No matter how great the talent or efforts, somethings just take time. You can't produce a baby in one month by getting nine women pregnant.
Monday, November 16th, 2015
Sacred Cow – definition:
One that is often unreasonably immune from criticism or opposition. Someone or something that has been accepted or respected for a long time and that people are afraid or unwilling to criticize or question.
If you are involved in merger discussions and are acquiring a firm, be sure to ask: What are your sacred cows?
When leaders of a firm want to be “merged-in” they might shy away from talking about their sacred cows until after the deal is done. Too late. The firm that is acquiring cannot facilitate the transition if they are not aware of the sacred cows.
What I usually observe is that it is a long-time employee who cannot be terminated. CPAs are kind and loyal. They keep some long-time employees just because “she has been with the firm for 25 years, even though she hasn’t adapted to our technology” or “he’s a partner, even though his performance hasn’t been up to par for many, many years.”
Sometimes it is tax software. “We will not change our tax package.” Period.
Remember, you are running a business. Why wouldn’t you negotiate a nice departure package and hire someone at half the salary who loves technology? Why wouldn’t you negotiate a retirement timeline and make departure easy?
As for technology and software, the entire firm should be using the exact same software and following the exact same procedures. That way any team member can work for any partner or office at any given time via remote connectivity. The same goes for basic office procedures. Of course, offices have some minor nuances and personality differences but the work gets done the same way and to meet firm-wide quality standards.
I don't want any vegetables thank you. I paid for the cow to eat them for me.
Wednesday, November 4th, 2015
This is one of those on-my-mind type blog posts.
Yesterday I was reading about the latest mergers happening in the world of public accounting. Well, actually, everyday I read about the latest mergers and it has been happening for the last several years.
I wonder if anyone is keeping track of the real number of CPA firms and how that number must be dwindling.
I have heard the experts (association leaders, other consultants, etc.) say that there are approximately 43,000 accounting firms out there and that the firms of any size at all number around 2,500 and the rest are sole practitioners. The 500th largest firm has 20 CPAs.
The AICPA separates the largest 500 firms into two groups the G100 and the G400. I am sure that the list of top 500 firms has changed significantly in the last five years.
Almost every firm I talk with has talked to another firm about a merger or is currently in active talks about merging.
Has your partner group honestly discussed where your firm is headed? It’s time to talk about it.
Your life does not get better by chance. It gets better by change.
Thursday, October 15th, 2015
It seems that merger mania still reigns. It started with larger firms acquiring smaller firms and evolved to gigantic firms acquiring other gigantic firms and everything in between.
Have you recently been merged into a larger firm? Even though it is all about clients and industry niches, progressive firms still focus on the people side of things. In a merger, some people lose, especially those professional support people in the firm being acquired.
How did the acquiring firm in your situation perform relating to embracing your people into their culture? Did they orchestrate all of the on-boarding activities so that everyone felt included? Do you now have a clear sense of what is going to unfold during the next year? Or, do you feel like there is a dark cloud hanging over your head?
If you joined the right firm, they have a clear plan, well-documented and well-executed for making the people they are merging-in feel part of something extraordinary. They excel at communication.
How do you feel about going into the office this morning?
Nothing will work unless you do.
Thursday, April 9th, 2015
As I have worked with CPAs around the country, all ages and in firms of various sizes, I often am saddened by the wasted opportunities I encounter.
It’s usually a communication issue and the willingness among partners to be absolutely open and honest. Someone might get their feelings hurt. There might be an uncomfortable feeling within the group for a while… but it doesn’t last if everyone is focused on “the good of the firm” and not on their own, personal agenda.
Here are some examples of where change is a roadblock to opportunity (these are fictional, gathered from various interactions over my 30+ years working in the CPA profession):
- A capable, experienced, passionate managing partner is prohibited from making the firm future-ready because she is constantly dealing with bickering partners.
- A firm located in a great market never capitalizes on growth opportunities because they have made several people a partner when these people do not market, do not sell, do not network in the business community and some have actually never-ever brought in a new client.
- A firm has a great expansion opportunity in a not-too-distant market, it slips through their hands because no partner will commit to being the champion of that endeavor. They are too comfortable with status quo.
- A great merger opportunity falls through because ONE of the partners in the firm being acquired kills the deal usually because he knows he wouldn’t measure-up in the new environment.
These are some fairly major change-is-needed examples, however, I see firms miss opportunity because of unwillingness to change some simple, day-to-day activities.
In these firms, partner meetings turn into repeat discussions of old issues and Opportunity moves on down the road.
The wheel of change moves on and those who were down go up and those who were up go down.
Monday, December 15th, 2014
I was reading the story on Crain’s Chicago Business about a smaller firm “selling out.”
The MP and his partner are nearing retirement and no one at the firm was ready to take over. Sound familiar?
They talked to a similar size firm (15 people) and decided that a combination wouldn’t solve their problem. So they “sold out” to a firm about six times bigger than their firm.
A common story, you say. Yes, that’s right.
Todd Shapiro, president and CEO of the Illinois Society was quoted: “If you don’t have your succession plan by age 50, you’re going to sell your firm.” Just think how many firms are in this boat!
Here’s the part, from the managing partner of the smaller firm, that made me sad. I have heard similar comments by scores of small firm MPs.
The managing partner says he not only expects to adjust to his new role as one member of the larger firms 13-person partner group, but he also welcomes the chance to focus on client work rather than management. “I’m not going to miss it,” he says.
My wish is that more CPA firm managing partners would make a heroic effort to learn more about management, read more about management, experiment with exciting trends, learn from their mistakes, engage with their people, quickly make decisions for “the good of the firm” and come to love managing their firm and be proud of their management accomplishments.
The managing partner of the larger firm, that has acquired 10 firms in the last eight years, was quoted as saying, pertaining to finding the right acquisitions, “I kiss a lot of frogs.” Don’t let your firm be a frog.
Life is like a movie. Write your own ending.
Kermit the Frog
Monday, November 10th, 2014
I have a lot of random thoughts about mergers/acquisitions, I lived through about 5 of them (acquisitions).
In the CPA firm world, we almost always call them mergers when actually they are acquisitions. There is a dominant player and I think there should be. Trying to please everyone creates chaos. So, the acquiring firm, should clearly explain and communicate the expectations up front and the firm being acquired should air any concerns and negotiate, up front. It doesn’t have to be an argument… think negotiation and communication over and over again.
Some partners are strongly against being acquired. It is usually the poor performing partners because they fear that they might… just might be held accountable and might not live up to the expectations of the new entity.
Mergers/acquisitions are the way to go if you want to grow rapidly or if you want to cash in your chips. I like to see mergers be structured as a win-win and they can be (even if it is really an acquisition).
Here’s a story I heard from a large firm partner many years ago about Bob, the long-time managing partner of a smaller firm.
Bob (this was back in the old days) had a button on his desk that he would push to summon his secretary. He usually pushed it when he wanted something specific done or wanted her to summon someone to his office. Of course, the employees joked about the button and always dreaded it when Bob “pushed his button.”
After being acquired by a large firm, Bob agreed to continue working for a couple of years for transition purposes. The larger firm managing partner (Tom) found Bob very challenging. Bob continued to push his button to convey his wishes to others.
One day Bob’s button disappeared. Bob immediately went Tom and asked in a demanding tone, “What happened to my button?!” Tom simply replied, “Bob, you sold your button.”
So, if you are being acquired by a larger firm – you are selling your button. That doesn’t mean it is a bad thing. It means you will have to change in some ways. Probably in ways you should have changed several years ago.
If you wait, all that happens is you get older.
Friday, June 6th, 2014
Terry Putney and Joel Sinkin of Transition Advisors have been writing a series of articles for the Journal of Accountancy over the last 12 months. It has been a year-long look at issues affecting succession for CPA firms.
The most recent issue of the Journal is out and Putney and Sinkin have focused their last article on the Do’s and Don’ts of Due Diligence.
I relate to how they describe due diligence as beginning when you first meet a potential M&A candidate and it every step along the way. You are continually assessing whether a combination of firms would meet your goals and expectations.
However, there is a more specific, intensive review of firm data that we usually think of when we hear the words: due diligence.
The authors tell us that the first step, as you start formal due diligence, is to exchange lists of what each side wants to see. To manage time and priorities, break the review down into three categories:
- Things that are readily available and can easily be delivered, for instance, by email. Examples are financial statements, tax returns, employee handbooks, leases, and employment agreements.
- Things that might require some effort pulling together, such as accounts receivable, breakdowns of client information (fees, industries, tenure), and operating metrics on productivity.
- Information that can be gathered only in the field, such as a review of workpaper files and quality-control processes, inspections of office and equipment, and interviews of key people.
Be sure to follow the link, above, and read the entire article in the Journal. The link to the article will also give you links to the other eleven articles in the series.
(Terry Putney, is that you with Rita?)
What we hope ever to do with ease, we must first learn to do with diligence.
Thursday, June 5th, 2014
In the CPA profession, we talk a lot about M&A (Merger & Acquisition). Yes, it is because so many baby boomers are aging out, cutting back, retiring or, in many cases, semi-retiring.
You can read a lot about M&A for the accounting profession profession. Just Google it.
You might think that “merging” is mostly about small firms or sole-practitioners “merging” their firm into a larger practice, but in recent times we have seen very large firms “merging,” too.
Here comes the “get real” part – it is an acquisition. If you are not the suitor firm, you have sold your button. There is a story that goes with “sold your button” but I will tell you that story in another post. But, I bet you get the meaning.
On AccountingWEB you can read about the recent “deal” with Rothstein Kass and KPMG. The reason I want you to read the article is the last paragraph.
You might not be a very large firm, like these two, but it is likely that you will be in discussions about M&A for your firm sometime in the near future. I always urge practitioners to talk to other firms and continually explore the M&A options, it doesn’t mean that deal will quickly occur. It is more likely that it will involve talking for a year or more before things are finally settled.
And, don’t be fooled by the comment in that last paragraph, I mentioned above: “We are looking forward to a seamless transition….. ” Being acquired or acquiring another accounting firm is never easy nor seamless.
Sometimes your best investments are the ones you don't make.
Wednesday, January 22nd, 2014
I just keep writing about and talking about the topic of CPA firm mergers. Why? Because I see a news release nearly every single day about so and so merging with so and so.
Yesterday I was reading a newsletter from August Aquila of Aquila Global Advisors and it was about, “Merger Mania – What You Need To Know.” Aquila probably has more CPA firm M&A experience than almost any consultant out there and he always shares valuable information to help you navigate the M&A waters.
The article addresses:
- Does this make sense for me?
- Who do I want to merge with?
- How do I know when I found the right candidate?
- Make the hard calls first.
The article has extensive comments under each of these bullet points. Read the entire article here.
A merger has to be a win-win event or it won't stand the test of time.