Articles & Info

The Art and Science of Finding a Merger Partner

Not every CPA is lucky enough to have a successor already lined up to take over his or her practice at exactly the moment they decide they want to retire.

In fact, most CPAs must consider other options, such as:

  • Seeking an external successor.
  • Acquiring or merging into a smaller firm to facilitate a future buyout.
  • Merging your firm with another for short or long-term buyout, or
  • Entering into a practice continuation agreement with another firm.

A lot of CPAs are talking to me lately about how to put an external successor in place through a merger. The path to a successful outcome is not always obvious.

First, ask yourself some seemingly simple questions, such as:

  • What are the five most common reasons clients come to your practice versus a competitor's?
  • What do your clients praise?
  • What distinguishes your practice from others?

Understanding these so-called "intangibles," can make it easier to identify someone your clients will appreciate when you are gone. But, maybe
more important, it can help identify who will keep the practice intact, guaranteeing your ultimate payout.

Start early. Rather than making a quick, rushed decision, you could create a list of firms that could be possible merger candidates and invest time observing how they act and learning more about them. Some of the best mergers have taken years to start developing.

And start networking. Make a list of:

  • Former employees.
  • Former employers.
  • Other CPAs you have known over the years.
  • Attorneys and bankers you have worked with.
  • Personal relationships from your connections at your church, synagogue, country club, civic or other organizations to which you belong.

Speak with them. Let them know you are considering your succession strategies and ask if they know someone who might be good to speak
with (or if they'd be interested themselves).

Get proactive. Consider advertising in trade publications or engaging a search firm.

Evaluate the prospects. It is critical that you understand what has made you and your firm successful. With that knowledge, you can effectively evaluate individual firm prospects. Personal chemistry is absolutely essential and the most requirement for a successful match. Capacity to
handle the client load and technical competence would be close behind.

Other things to consider carefully:

  • Reputation of the person or firm
  • Practice specialties
  • Fee structure
  • Profitability
  • Location
  • Staff

Financial condition, credit worthiness, and a background investigation need to be considered before finalizing a deal.

But most of all, you'll need to determine if your prospect shares your ways of doing business to ensure maximum client retention. It's part science, part art; and rarely easy. But, in my experience, when it's done right, it's well worth the effort.

If you'd like to discuss this or any other issues related to your practice or career, please don't hesitate to contact me: My direct line is (212) 490-9700. Or email me here. Absolute confidentiality always assured. - Robert Fligel, CPA

P.S. See RF Resources featured in Crain's NY article on CPA mergers "From Minnows to Marlins".

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Robert Fligel
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