It’s time to get to know each other.
By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide
All merger discussions have to begin somewhere. After merger candidates have been identified, there obviously needs to be an initial meeting for the two firms to get acquainted.
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Everything is confidential and informal. No exchange of financial statements. The two parties simply spend an hour or two – you guessed it – getting to know each other. Many firms like to convene this meeting over breakfast or lunch because meeting at a restaurant gives the encounter an air of informality and sociability. Other firms like to do this in the larger firm’s office so that the smaller firm can get a “house tour.”
Organized chap that I am, I always have a “cheat sheet” that I use to get the conversation going. But as a good facilitator, my goal is to shut up as much as possible and get the two firms talking to each other.
No one can or should try to legislate how this first meeting is conducted. It should be free, easy and natural. However, just to give you an idea, here’s an example of a common “cheat sheet.”
THE GET TO KNOW YOU MEETING CHEAT SHEET
Date:
Key questions for first meeting, not necessarily in this order. Not all questions will be applicable to all firms and deals.
- Tell each other about your firms:
- History of firm
- How many people/partners
- Annual fee volume
- Partners’ ages
- Markets you are in
- Services provided:
- Audit % Actg % Tax % Consulting %
- Industries served
- Specialties
- Seasonality
- Describe your staff
2. The buyer should share with the seller what the firm’s vision is.
3. What experience does each firm have in the other’s main service area(s)?
4. Why does each firm wish to merge? What benefits will be expected? What’s the driver?
5. What does the seller hope to get from this deal? How would the buyer answer this question from the seller: “If we merge, how will your firm (the buyer) make this a good deal for us (the seller); how will we be better off?”
6. Any recent changes driving the desire to buy or sell?
7. Does the buyer’s staff have the capacity to perform the seller’s work?
8. How would the buyer assign the seller’s clients to buyer’s personnel, (if applicable)?
9. Compare billing rates and fees:
- If the buyer’s rates and fees are higher than the seller’s, to what extent will the seller try to raise rates and fees? How sensitive will the buyer be to the seller’s client’s willingness and ability to pay higher fees?
- If the seller’s rates and fees are higher than the buyer’s, how will this be handled by the buyer?
10. How is the buyer managed? What is the organization structure? To whom will the seller be responsible?
11. Has the buyer acquired firms before? If so, how have they worked out? If they haven’t worked out, why?
12. Transition of client relationships (if applicable):
- How does the seller plan to make this transition?
- How does the buyer plan to make this transition?
13. The seller continuing to work for the buyer after the sale:
- What does the seller expect and desire?
- What does the buyer expect and desire?
14. If the seller would like to work part-time after the transition is completed, how feasible is this to the buyer? How might it work?
15. What attributes of the seller has the buyer found to be predictive of how successful the merger will be?
16. What characteristics, issues or events would doom it to fail?
17. At this first meeting, specific terms for the deal are rarely However, to the extent that either buyer or seller wishes to give an indication of specific terms they are looking for, this can be “thrown out on the table.” Both sides understand that nothing is binding, nothing is final and everything is subject to negotiation and due diligence:
- Purchase price
- Term of payment
- Down payment
- Compensation of the seller after the sale
18. The two sides should share with each other dates by which they would like the deal to be closed.