Four Common Pushbacks in CPA Firm Mergers

by Ira S. Rosenbloom, CPA (inactive) | Feb 28, 2019

Often, a CPA firm will start very comfortable conversations with another firm about doing a merger deal or an acquisition. Then, despite early good vibes, pushback is often encountered. Pushback is not rare, but if you don’t handle the issues of concern promptly and comprehensively, getting the deal done will become much harder.

The key for any firm entering merger or acquisition discussions is to anticipate, recognize, and correct deal draggers before they become deal breakers. Here are four common pushbacks and how to handle them.\

Pace Panic

Like traffic, mergers and acquisitions often move too fast or too slow. The pace is seldom “just right” for different firms and different partners.

When a firm starts shouting “Slow down!”, it could be for a couple of reasons. There may not be complete buy-in from the firm owners, so time will be needed to build consensus. Negotiators may not have realized how quickly the proposal would come together, or one firm may be too busy to focus on negotiations at the moment and need time to gather the appropriate data.

Some may begin to feel that the other side is too aggressive or, even worse, that they’re desperate to get a deal done quickly. But pushing to move quickly may have innocent motivations altogether. For example, some team members may be retiring or a lease may be expiring.

If one firm appears to be moving too slowly, that too may set off alarms that the slower firm is not serious about the transaction – or that it is in negotiations with another firm.

To even out the pace, both parties should verbalize, up front, their ideal timeline. An impartial third party can help map out a best-case timeline. The firms should decide not only on an end date, but also create a calendar for the important steps that will be taken, including deliverable dates, frequency of meetings and communications, and so forth.

Trauma of Change

A practice combination offers great opportunity; it may also mean significant changes for one or both parties. Some firm owners will be buoyed by the changes; others may be afraid of them.

This particular pushback comes with the realization that firm members may not be able to continue doing things the way they always did, and that adapting to new ways is going to be a big effort.

The issue could arise from smaller, day-to-day changes, like learning new processes or procedures. It could also have a basis in something more substantial, like changes to insurance, firm name, or pension and health plans. Any one of these could derail negotiations, if allowed.

A good way to address the change pushback is to have an early conversation about the top worries that each side has or can envision down the road. Being aware up front and thinking through the solutions early are much better than surprise and panic.

Finality Fright

It is not unusual to have a conflict between the intellectual purpose in aligning with another firm and the emotional consequences of succeeding. People may recognize that they lack a successor, but sometimes during continuation conversations they decide they aren’t ready to stop. The fright over finality may prompt some to push back with comments like, “I don’t think I can commit to a date to stop working,” or “I want to work until they carry me out.”

Creating a job description and timeline for shifting functions creates clarity and will set the stage to ease most worries. There are ways for people to continue being busy in the firm, but not necessarily directly handling clients. Mentoring, teaching, being a goodwill ambassador, and focusing on research are just some ways to perpetuate relevance and make it a win-win for all.

Financial Disconnect

A disagreement in valuation is one of the most corrosive and corruptive deal draggers. Unrealistic expectations will create a quick and powerful pushback.

Ahead of a first meeting, all parties need to do their homework and be informed about what the prevailing factors for firm value are, and where the firms are most affected by those factors. Niche practices, marketplace competition, and other variables all influence valuation.

Conferring with those who are active in local mergers and acquisitions would be beneficial, as would contacting experts who consult on practice transfers. Have a model in mind ahead of conversations. If the parties are still off track, bringing an independent voice to the table may help set things in order. The best deal is a fair deal – for all parties involved. Remember, you will have to work together after the negotiations are over.

While there are many issues that firms will push back on during merger and acquisition negotiations, with a little preparation – and the proper mind-set – they will be able to head off those deal draggers before they become deal breakers.

Ira S. Rosenbloom, CPA (inactive), is chief operating executive for Optimum Strategies LLC in Spring House. He can be reached at
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