In a preview of “Practice Integration Imperatives,” his Practitioners column from the fall 2019 Pennsylvania CPA Journal, Ira Rosenbloom of Optimum Strategies LLC tells us why coming up with a well-designed integration plan could be just as important as getting the financial details right when going through a CPA practice transfer or merger.

If you’d like, you can download this episode’s audio file. Additionally, you can follow us on iTunes, Google Play, or subscribe to our RSS feed.

By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

While the most important part of a CPA practice transfer or merger might be negotiating the financial terms, high up on the list would also be developing a well-designed integration plan. Yet, according to today's guest, Ira Rosenbloom of Optimum Strategies LLC, it is a step that is often overlooked. To make sure practitioner readers do not do that in the future, Ira has written “Practice Integration Imperatives” for the fall 2019 Pennsylvania CPA Journal, and today he joins us to offer up a preview of his article.

When working on a CPA practice transfer or merger, how important is it to have a well-designed integration plan?

[Rosenbloom] It's huge. Clearly the financial components are very important, but if you don't have a strong and well-drafted integration plan, you're not likely to enjoy the fruits of all those very intense negotiations. So both parties have a very big role to play in what really is the success of the merger, which is a reflection of strong integration, transition, collaboration and community.

How important is collaboration to the process, or should there be one firm that takes the lead?

[Rosenbloom] Collaboration is essential. Traditionally, if you're an exit-oriented practitioner looking to align yourself with the larger firm, you have many anxieties about what the changes are going to be. The more you can have a voice in how that integration and the transition is going to take place, the more confident you're going to be in seeing it happen in a comfortable way for your staff and for your clients. And the larger firm, the more it can be aware of your sensitivities and concerns, the more they can plot it out and make sure that both parties are working toward the same goal.

Everybody wants to make money. That is not the issue. But are we going to make our money in the right way or are we going to step on our own toes because we didn't plan for it properly? When you look at a situation where two firms joined together, where there's not necessarily an exit emphasis, but to the contrary, they're going to be working together for quite a period of time, then figuring out which best practices and how to modify those best practices is really important to the long term, and certainly in the near term you don't want any confusion. “We used to do it that way. What happened?” So the more lead time you have, especially when you're bringing firms of equals or near equals together, then the better it's going to be for perpetuating, growing, and keeping the firm on the right stage.

There are some factors in the transaction that you believe often need more consideration than they sometimes get. So I want to go over some of those. What are the best practices in the area of staffing and easing their transition?

[Rosenbloom] It's clear that both parties have staff that are going to be strangers to each other, and yet they're going to be required to work together once the deal starts. So the sooner you can introduce both parties' staffs to each other and build a bond, have a buddy system, have a system where there is an opportunity to ask questions both in public setting and in a more quiet setting is going to set the stage for comfort and communication.

Communication is essential. Both sides are going to be curious. Both sides are going to have anxiety. Somebody may feel that the new people coming in potentially might replace them. Which, of course, in today's world where it's difficult to find accounting personnel, it's unlikely, but responsibilities may change and that can be very, very unnerving.

It's important to have these people understand that humans are working here, that software is part of our world, but the sooner that they can interface and discuss their policies and understand what each culture is and where the best of each culture may lie, the better off it is for having your staff be comfortable. The sooner your staff could potentially even be involved in the due diligence process, because they're going to work on some of these clients or they're going to be exposed to some of the clients, the better off it's going to be.

A lot of conversations between firms are very focused on the negotiation and the client. Not enough attention is paid to how our staff is going to interface with each other.

What should be done to ensure that clients don't feel like they're going to suffer as a result of a merger or a transfer?

[Rosenbloom] Both parties have excellent clients and the excellent clients have been accustomed to receiving excellent attention. So whether you're the small firm joining forces with the large firm, or the large firm taking in the small firm, or a merger of equals, it's really important to get out front to your best clients and have them understand what is not going to change in the way of the attention factor, and what's going to improve in the way of the attention factor. The better clients want a lot of attention, having more resources, more personnel, better software is always going to set the stage for being able to be more responsive and more capable of charting the path for your client.

So you've got to really get out front with your clients. Don't keep it a secret when it comes to your better clients. Let them know that you're running a business and it's a business that needs to continue to prosper. And part of that prosperity comes from selected growth, that there was selectivity behind what you did and that would be very meaningful to them as well.

So those clients who ultimately are the lifeline, they're going to pay the fees, they're going to grow with, need to feel that they will be as welcome as they ever were before and that the upside for them is significant.

Part of your work with the client is obviously communicating with them, especially in something like this. So how about the external communication in this situation? What does the messaging have to say, how should it be delivered and who does it have to come from?

[Rosenbloom] The messaging should be consistent from both parties to the transaction so that there are no mixed signals. Whatever the emphasis is has to be clearly defined up front and both parties have to articulate it in a similar fashion. This is not that anybody needs to read from a script, but they need to be sure that we're leaving a consistent message behind.

In terms of how the communication process works, it's a combination. There are some people that you have to speak with face to face. There are other people that you could send a letter and then follow up in a face to face. And there are other people who don't have enough time to spend face to face, so a letter would be the approach that they would prefer. But there are ways of doing things with videos today that might be much more personalized to that person and get the messaging across.

The message will come across with greater power if it's a message from both parties to the table. The firm that is joining forces, let's say it's an exit-oriented individual or somebody who's planning for a three-to-five-year situation, they are going to initiate the dialogue but there needs to be follow-up from the other side. There needs to be contact between the other side with the largest clients of that exit-oriented practitioner so that they could see that the firm has similar attributes in the way of personality, that there's going to be a continuation of that attentiveness and that respect.

It's got to come from all sides and the staff has to play a role. The staff has to be very motivated and excited because if the clients perceive that the staff isn't supportive, that is sending the wrong message.

We talk about the role that staff needs to play and then we'll talk here about the role that leadership needs to play. What role does leadership have to play in setting the tone for a successful integration?

[Rosenbloom] Leadership has to come from the following places: One, the power of the transaction, what it's going to do for all those vested parties. Two, patience, because no matter how well-designed the integration plan is, things will go wrong. We can't control everything. Sometimes, people forget to do certain things. The more that the leadership, the ownership, is on board and respects the fact that patience is a virtue and that, if there is a problem, we're going to get through it, as contrasted with, “I knew something would go wrong and therefore I didn't vote for it.” Once the decision is made to move forward, and it is sometimes not a unanimous decision, it's got to be unanimous after that decision that we're all aligned to move forward giving this our all so that it would succeed.

That has to come across in clear, bold transparency. It's important to everybody. We're supportive of it and we're going to do a quality job with it just like we do when we service our clients. We're going to welcome the other party and we're going to go the extra mile.

What about personnel who are seen as future leaders of the practice? A merger or a transfer, it can create some angst there to be sure. So how should the combined practice go about settling the unease around that?

[Rosenbloom] The easiest example, which will allay the fears of somebody who's going to be a future leader, is the situation where you may be having a retirement-minded or exit-oriented individual joining forces with a larger firm, then the future leaders of that larger firm are going to most likely be taking over the book of business of that retirement-minded individual. Their future is much more solid. True, these are clients that they've not worked on before, but it's very stimulating to have change and to have new priorities. Their economic stature is going to be enhanced through a merger of a retirement-focused individual into another firm from that standpoint.

When you're bringing parties that are close to being equal, now it's a question of highest and best use. Sometimes we stretch ourselves too thin and it creates frustration from our future leaders. So if we're going to combine forces, as a future leader, I may have a happier lifestyle. I might be able to focus much more on a cadre of clients that I enjoy, a niche or a size of client, and therefore my loyalty to the firm is going to intensify and my quality of life as a professional is going to be enhanced. That would be the win-win to come out of it so that everybody is doing what they are best at instead of a little of everything. That would be a terrific end result to have these future leaders thrive.