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  • Jun 28, 2022

    5 Priorities in 2022 to Win at M&A

    Ira Rosenbloom pictureBy Ira Rosenbloom, CPA (Inactive)


    There has been a flurry of accounting firm mergers and acquisitions (M&A) already in 2022, and that trend does not look as if it will diminish any time soon. As is the case in the day-to-day operation of CPA firms, the same two factors are making a hardy impact: staffing challenges and the acceleration of technology.

    Buyers are becoming increasingly concerned about their own capacity in addition to the depth of the firms looking for a merger. Smaller firms could be more appealing. However, the client list of the firm being acquired must be stellar and confidence in the smaller firm’s people must be high.

    On the other hand, some buyers are looking to new frontiers in the areas of geography and expertise. As more practices embrace virtual workplaces and technology, connections can be maintained anywhere in the world. Therefore, the former geographic constraints of M&A are now wide open when it comes to looking for a firm to merge with or acquire.

    Sellers who think that their staffing issues will be solved via merger are quickly learning otherwise. Without the right clients and an ability to adapt to technology to be more appealing than other businesses looking for a deal, sellers’ options are closing.  

    Two teams negotiating at board table (overhead view)So, what do buyers and sellers in today’s market need to do to be more successful with M&A? Here are five vital priorities that every firm should tackle now.

    Focus Big on Clients – Acquirers will be looking for certain types of clients, and sellers need to have them. Both parties need to have a strong sense of how their own clients will feel about a combination, and what their best clients will be most concerned about. If clients are negatively impacted, deals fail. Know your ideal client profile and what both parties want that client profile to be after the transaction.

    Concentrate on Metrics – Baseline metrics need to jell. If too much work must be done on profits, rates, and pricing policies, the less likely the transaction will be. Smaller firms need to understand the overhead structure of larger firms and be on board with investing in overhead. Larger firms must have efficiencies and deliverables that allow the small firm to recoup and grow profits over time. The parties need to be fully aware of the market for fees and services and be prepared to be in it or above it.  

    Address Pushbacks Early – Every transaction has negatives. Each side needs to gather the concerns and share them internally and with the other firm so roadblocks can be cleared. If concerns do not get addressed, the process may need to stop. The effort to arrive at a deal is often greater than the parties were ready for. The earlier all the parties understand the troubles, the better they will use their time and the more productive screening and selection will be.

    Clarify Expectations – The acquirer is generally interested in proceeding so it can make more money, have a larger market share, and grow their expertise and client service. The firms looking to align need to be able to present facts to support the achievement of the goals for the other side. The more realistic the achievement potential is, the more viable the transaction will be. In other words, firm leaders should figure out what they want the future firm to look like. Sellers and the post-combination firm may need to turn to outsourcing as a means of handling workload compression. The ability to improve is vital for the success of a transaction. Consensus on outsourcing is a timely example of aligning expectations, as well as the nature of services, in a world where advisory services are becoming more necessary.

    Prioritize Integration and Prep – A smooth transition is in everyone’s best interest. However, many firms neglect thinking through the integration process sufficiently. Often, rather than making things easier, a virtual world brings challenges that add to integration complexities. For firms to get out of their comfort zones, they may need more time to process the possibilities. While not every detail needs to be evaluated ahead of document signing, a framework for transition needs to be agreed to ahead of a deal. Often deals blow up not because of the terms but because of poor implementation and integration.

    Great benefits can be realized through CPA firm M&A for all parties involved. After all, there is a good reason we are seeing so much M&A activity recently. The bar for success is rising, and so is the upside for all.


    Ira S. Rosenbloom, CPA (inactive), is chief operating executive at Optimum Strategies in Spring House, Pa., and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at ira@optimumstrategies.com.  


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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.