Five Steps to Successful M&A

August 6, 2019

You’ve been approached by another firm about a possible merger or acquisition. Or maybe you’re thinking ahead to retirement and are looking for a good match. Before you walk down the road to M&A, I recommend making sure you’ve laid the groundwork for success.

  1. Put your house in order. Your financial information tells potential partners and owners not only about the health of your firm but also how well it is managed. Both issues will be key considerations for merger or acquisition partners. Before any initial meetings, make sure your data is complete, accurate, and up to date. Include all the information that’s important to CPA firm leaders, such as realization and utilization. Not sure what you need? Review the key performance indicators included in the PCPS National Management of an Accounting Practice (MAP) Survey to find out. The MAP Survey data will also reveal how you stack up against other firms of similar size and help you take proactive steps to spot and address your strengths and weaknesses. You’ll be able to present a strong picture to a potential partner or owner instead of having to play catch-up on financial or management concerns in the midst of your negotiations.

  2. Perform due diligence on the other firm. In addition to KPIs and critical financial data, don’t overlook issues such as partner capacity. If you are handing over your clients to the new firm—or bringing them in as you come onboard—are you confident that the firm can handle all that new business? When I was involved in merger negotiations, we found out that not all partners have the same levels of capacity, so dig down to see how much business each of the partners actually handle. Also see if there are weaknesses in the firm’s management approaches or structure that could make it challenging for them to transform into a bigger practice.

  3. Ask questions about culture. Your firm is committed to customer service and to personalized client relationships. Your potential partner may have the same commitment, but what does it mean to them? How often do professionals at the other firm meet with or contact clients? How quickly do they respond to client communications? Your clients have chosen your firm for a reason, so make sure they have good reasons to stick with the new one. They will likely already worry about whether their fees will change in a transition and how the transition will affect their relationship with you, so be sure they are not given anything else to worry about. The same goes for valued staff members who may be moving to a new firm. They played a large part in making your firm successful. Will they feel welcome and comfortable in the new practice so that they can help ensure the transition is successful?

  4. Get to know the professionals who run the firm. When I was considering a merger, I asked to meet with each partner, and that decision helped me avoid what would have been a bad match. During these conversations, one partner told me he wasn’t excited about the possible deal because he would have to buy me out when I eventually retired. I really wanted a deal where everyone was on board. I recommend going to lunch with all your potential merger or acquisition partners and having a relaxed discussion where you can hear their honest opinions. Do some soul searching of your own, too. Will you be happy in a much larger practice and with more partners? Does the firm’s management or marketing approach suit your style? All of this information could be very useful in your decision making.

  5. Be flexible. A good merger or acquisition should start out with a honeymoon period, but even the best matches will hit some bumps along the way. The clients and staff you bring to a new firm will look to you to be a positive leader who can help them navigate any challenges or unexpected changes they may face. Try to be as flexible as possible and to set an upbeat tone that others can follow.  

These steps should position your firm for a satisfying deal that will be successful now and going forward. You can find more helpful tips in the PCPS Succession Planning Resource Center. Good luck!

Carl Peterson, CPA, CGMA is the Association’s Vice President of Small Firm Interests. Have questions for Carl? Contact him directly at or 651-252-4618. And be sure to sign up for Carl’s Small Firm Update webcasts. The next one will take place on September 26 at 2:00 to 3:00 PM ET.