2016 Outlook: No End to Mergers in Sight

2016-ROUNDTABLE-OUTLOOK-FOR-ROSENBERG-MAP-COMMENTARY-VF-240x219A buyer’s market is on the horizon.

They say “past results are no indication of future performance.” Maybe. Maybe not. But if anyone should know, it’s our panel of experts, their comments drawn from the new edition of The Rosenberg MAP Survey. These are their bullet points and comments, verbatim, looking back at the last 12 months and looking ahead to 2016. – Rick Telberg, CEO

By Gary Adamson
Adamson Advisory

Lessons from 2015:

Merger mania continued over the last year for several reasons:

  • continued slow post-recession organic growth,
  • thousands of baby boomers with no internal succession plans in place and
  • competition heating up for middle-market clients (the big firms want our biggest and best clients!).

MORE FROM THE ROSENBERG MAP SURVEY: Why Outsourcing Beats Unicorn Hunting | 2016 Battleground: Aging Leaders vs. Emerging Leaders | Private Clouds on the Rise | Firms Growing, Still Face Talent Challenges | Outlook 2016: Another Economic Storm Coming? | How Succession Issues Are Driving Desperation Mergers | Outlook 2016: Change Catches Up with Auditors | Strategic Plans Undermined by Out-of-Control Partners | Growth, Succession Plans Critical for Firms | Talent Wars Go from White Gloves to Boxing Gloves | Trend Outlook 2016: Change Agents Needed

Firms are improving profitability with per-partner income rising while the talent wars that we saw pre-recession are returning.
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8 Questions That Staff Ask In a Merger

Group of businesspeople hiding their faces behind question mark signs at officeAnd 6 steps to handling the process.

By August Aquila

To get your employees’ commitment to a merger, they must understand how it impacts them personally and see the opportunities for themselves.

MORE ON LEADERSHIP FOR PRO Members: Does Your Dashboard Need Fine-Tuning? | 6 Practical Ways to Innovate | 8 Ways Leaders Destroy Firms | The 4 Best Ways to Use Your Senior Partners | How to Tell a Culture Change Is Due | Today’s Top 6 Partner Compensation Trends | Why Your Firm Should Be a Republic | Partnership Is About Persuasion | How to Build a Growth-Centric Pricing Strategy | How to Combine Two Firms after Merger: Carefully

Let’s assume that the announcement for the upcoming merger or sale is handled properly. In other words, it was not leaked or there were no rumors on the street. You can be sure that once the announcement is made, employees start thinking about one thing – How does this event affect me? This is about self-preservation; it’s an emotional and psychological question that everyone will ask themselves.
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Mergers: Assessing Compatibility

Overhead view of people solving a large jigsaw puzzleBONUS CHECKLISTS: 8 questions to answer and 23 issues to negotiate.

By Marc Rosenberg

These questions can be explored via interviews or group sessions. But they are all great questions that will give insight into each firm’s culture and personality.

MORE ON MERGERS: What to Discuss at the First Merger Negotiation Meeting | 14 Provisions to Include in a Letter of Intent | Case Studies Reveal Potential LOI Issues | Want to Merge? Ask for Data | The Merger Process in 21 Steps | 13 Ways to Screw Up a Merger | 15 Can’t-Skip Merger Terms to Decide | 14 Keys to a Successful Merger | 13 Reasons Accounting Firms Merge | Mergers 101: When Negotiations Aren’t Really Negotiations | 5 Steps to Take Before Merging

  1. Why do the firms really want to merge? After the merger, will the firms have the commitment and wherewithal to realize their expectations? Acid test: If some of the main reasons for doing the merger are clearly not realized 12 months later, which issues and failures would make you the most upset and frustrated?
  2. How would the new firm be better than the sum of the two individual firms?
  3. Do both firms share a similar vision for what the firm should look like in five years? Growth, services offered, specialties desired, industries served, number of offices, etc.?
  4. Do you share similar values? Values include things like how billable a partner should be, how important it is for a partner to follow the rules, the importance of being a business-getter, how staff are treated, work ethic, etc.
  5. Each firm should tell the other the following:

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What to Discuss at the First Merger Negotiation Meeting

Four businesspeople greeting each otherSmaller, larger firms likely have different concerns.

By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide

Mergers succeed in direct proportion to the effort made by both firms to

  1. ask lots of questions,
  2. agree on as many merger implementation issues as possible before the merger takes place and
  3. openly share as much of their “dirty laundry” as possible to minimize surprises.

MORE ON MERGERS: 14 Provisions to Include in a Letter of Intent | Case Studies Reveal Potential LOI Issues | Want to Merge? Ask for Data | Plant Seeds to Turn Up Merger Candidates | Looking to Grow Your Firm? How to Find a Seller in Four Steps

Don’t assume anything. When you sit down for your first merger negotiation meeting:
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Thinking of Merging? Discuss It At a Retreat

Two chess kings on a chessboard with other pieces in backgroundBONUS CHECKLISTS: 9 major merger terms. 13 typical steps in the process. Plus questions to consider in upward and downward mergers.

By Marc Rosenberg

One possible topic for a retreat is a potential merger, whether upward or downward.

MORE ON RETREATS: How to Take Action After a Retreat | 12 Simple Rules for a Retreat | Leave Your Retreat With a To Do List | Every Retreat Needs a Leader, But Who? | Retreats Are No Place for Clowns | Who Should Participate in a Retreat? | Retreat Logistics: How Long, What Kind? | What Should CPA Firms Discuss at Retreats? | Why Do CPA Firms Conduct Retreats?

There are several keys to a successful merger:
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14 Provisions to Include in a Letter of Intent

Smiling businessman holding clipboardAvoid promising to “negotiate in good faith.”

By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide

Letters of intent should be drafted cautiously and with as much detail and precision as possible. This avoids potentially fatal misunderstandings or disagreements around key terms later in the process.

MORE ON MERGERS: Case Studies Reveal Potential LOI Issues | What to Ponder Before Issuing a Letter of Intent | Want to Merge? Ask for Data | One Times Fees Is a Steal! | The Merger Process in 21 Steps | Plant Seeds to Turn Up Merger Candidates | 13 Ways to Screw Up a Merger | 15 Can’t-Skip Merger Terms to Decide | 13 Reasons Accounting Firms Merge | 5 Steps to Take Before Merging

An LOI is too often seen as a non-binding jumping-off point, with no real consequences. This is not exactly true. For starters, an attempt by one party to change a material term in the LOI can be characterized by the other party as an act of bad faith or a breach of trust, which can
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Case Studies Reveal Potential LOI Issues

Model train derailed as model workers look on8 ways to drive a merger off the rails.

By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide

As you will see from reading these examples of issues I have seen arise at second meetings, touchy or sensitive items are much more easily dealt with before the letter of intent is prepared than after.

MORE ON MERGERS: What to Ponder Before Issuing a Letter of Intent | Want to Merge? Ask for Data | Merger Prep: Getting to Know You | One Times Fees Is a Steal! | The Merger Process in 21 Steps | 13 Ways to Screw Up a Merger

The discussion at this second meeting steers the parties closer to a mutually acceptable transaction in the direction that the seller is looking for, thus minimizing contentious issues that often arise when an LOI is issued that amounts to a “stab in the dark” by the buyer.

Here are some agenda items for second meetings I have recently led:

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What to Ponder Before Issuing a Letter of Intent

Generic business letter of intentThe difference between the first and second meetings.

By Marc Rosenberg and Peter Fontaine*
CPA Firm Mergers: Your Complete Guide

For now, let’s define the letter of intent as a written offer made by the buyer to merge in or acquire the seller. (A thorough definition is given later in this post.) It is a relatively short, simple, non-binding offer, subject to

  • further negotiations,
  • performance of due diligence and
  • a formal vote by the buyer’s partners.

MORE ON MERGERS: Want to Merge? Ask for Data | Merger Prep: Getting to Know You | One Times Fees Is a Steal! | The Merger Process in 21 Steps | Looking to Grow Your Firm? How to Find a Seller in Four Steps | 13 Ways to Screw Up a Merger | 15 Can’t-Skip Merger Terms to Decide | 14 Keys to a Successful Merger | Mergers 101: When Negotiations Aren’t Really Negotiations | 5 Steps to Take Before Merging

Before the LOI Is Prepared

The first meeting was the “get-to-know- you” meeting. The purpose of this meeting was simply to introduce each firm to the other, give each a chance to “kick the tires,” get a feel for the personality and style of the other and to share some very basic information, all of which is designed to help each firm decide if they wish to go to the next stage. READ MORE →