Monthly Checklist Series

MONTHLY CHECKLIST SERIES

Keep Mergers on Track

Mergers are complex processes that may derail unless the two entities forge a common path. Whether a CPA firm is merging with another firm or consulting with a client that’s considering it, a simple checklist will help facilitate the process. Before sealing a deal, the parties should think about their long-term plans and address—in detail—all aspects of financial, product, plant, timing and human resources responsibilities.

Will you be better off “married”? Whether your firm is thinking about merging or is assisting with a client merger, the first order of business is to be sure such a move is in the entities’ long-term interest. To gain that understanding, the parties should

Identify the reasons to merge. Are they to increase the firms’ or the client’s geographic market, to increase services to current clients or to respond to competition?

Perform a postmerger profitability assessment. Look at both firms’ or clients’ practice strengths and weaknesses, and get answers to questions such as: In what ways will the merger create savings or increase business? Who will be in charge? Will staff become redundant? Are there any off-balance-sheet liabilities such as retirement obligations?

Analyze the firms’ practice areas, practice mix and logistical factors for whether efficiencies that can’t be achieved by other means will result.

Decide whether to use consultants in the merger process. If so, specify how you—or your clients—want to use such help. Determine the costs and fee arrangements.

Report initial findings to the firm or client management committee or partnership.

If the firm or its client wants what a merger has to offer but has no specific candidate, initiate a search for one. Useful sources of information are business acquaintances such as customers and competitors, financial publications, third-party consultants and search firms.

Next, make it work. Once a firm or client knows with whom it wants to merge, the parties must

Decide on a name for the combined entity.

Assess and fine-tune other major logistical issues such as creating a common information base for clients, products, procedures and personnel.

Analyze the two entities’ business mix to determine how to enhance a joint service and client-development strategy.

Look at the practice niche management and service delivery to restructure internal accountabilities as needed.

Integrate the two entities’ benefit programs and tax considerations.

Document everything when preparing the merger agreements (before, during and after).

Craft an implementation program that outlines the actual joining of the firms and adheres to a pre- and postmerger schedule. A merger committee might perform these specific tasks or assign them to subcommittees.

Source: Adapted from “A Practical Consideration Merger Checklist” by Gary R. Garrett, www.wbpartners.com.