2019: Using M&A to Launch Consulting

Putney
Putney

Technology drives hours down 40%; how will your firm cope?

By Terry Putney
The Rosenberg Survey: National Study of CPA Firm Statistics

The market for mergers is clearly moving toward narrow selection criteria for the acquiring side of transactions. Part of this is because of the increasing numbers of firms seeking to be acquired that are available. However, acquiring firms are also much more strategic with their objectives for an acquisition.

MORE FROM THE MAP SURVEY: 2019: More Focused Training | 2019: Expect More Alliances | 2019 Trends: Client Service Changes | 2019: Shifts in Hiring & Office Space | 2019: Firms Grapple with Change | Staff Policies Improve, But Not Mentoring
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Strong organic growth means pure revenue acquisition is not enough anymore. Firms with a need for a near-term succession of a substantial portion of the partner group are finding fewer takers among the larger firms. Firms that can be acquired to help grow and launch non-traditional, non-compliance-oriented service lines are in high demand.
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Succession Issues Stalling Some M&A

Four businesspeople, left handshakeOwner agreements are seeing updates.

By Terry Putney
Rosenberg MAP Survey

The level of activity we’re seeing in M&A deals is unprecedented.

MORE FROM THE MAP SURVEY: Firms Focus on Profitable Growth, True Leadership | Survey: Many Firms in Transition | Technology Playing Center Stage in CPA Profession
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Many firms in larger markets are often approached directly by firms interested in discussing a merger. The days of discreetly pursuing an affiliation strategy appear to be waning.
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The Importance of M&A Culture Due Diligence

Woman and man shaking hands in office conference roomA 6-point blueprint.

By Domenick J. Esposito

Over the last several years, there have been over 200 merger, acquisition, alliance and joint venture announcements by the Top 100 and other fast-growing CPA firms. Every indication is that these combinations will continue at a very rapid rate as CPA firms are:

  • Facing an aging partner group that usually includes the most effective relationship and business development partners. Baby boomers have been a home run for CPA firms.
  • Finding organic growth very difficult to attain with little prospect that business is going to dramatically improve in the foreseeable future.
  • Realizing an inability to attract an adequate supply of high-quality talent to help perpetuate the firm.

MORE ON STRATEGIC PLANNING: Get Your Money’s Worth from Non-Billable Time | Stay Independent But Keep Looking Upward | Ineffective Partners and How to Address Them
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CPA firm CEOs and other senior management are very effective at financial and operational due diligence, tracking results and holding partners accountable for hitting timely targets. On its face, an observer would tend to conclude that these 200+ combinations are very accretive to partner profitability after an integration period of 18 to 24 months.
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Time Is Running Out for Succession Planning

Digital visualization of a blue alarm clockBONUS: 22-point M&A due diligence kit.

By Domenick J. Esposito
8 Steps to Great

Much has been written and discussed regarding succession planning at CPA firms driven by the vast number of founders, leaders, and rainmakers who are retiring at a record pace.

MORE ON STRATEGIC PLANNING: Expand Your National and Global Geographic Reach | Using a High-Performance Business Framework | What a Client Service Plan Can Add | 36 Consulting Services You Might Be Overlooking | How to Drive Consistent Partner Behavior | CPA Firm Partner Performance: Different Activities, Different Metrics | Develop the Partners You Already Have | How Many Partners Do You Need?
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Key takeaways in this post:

  • Mid-market sustainable brands generally combine practices as opposed to acquiring or buying practices.
  • Spend time to make sure it feels right.
  • The easier part is getting the contract signed; the harder part is the integration of the two practices and to make sure 1 + 1 at least = 3.

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SURVEY: Mergers Spur Growth

Five businesspeople shaking hands under office skylightLeadership, succession planning remain challenges.

By August Aquila
The Rosenberg MAP Survey

The majority of my clients had a very good year in 2015.

MORE FROM THE SURVEY: Don’t Just Win Work, Figure Out Why | Talent Wars, M&A Frenzy Continue | Next-Gen Leaders Getting Restless | Mergers Keep Racing Forward  | Do You Have a Firm or a Co-op? | Accountability, Equity, Compensation Are Concerns | MAP Survey Top 10 Findings | CPA Firm Revenues Rise a Hefty 8%
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There were two primary reasons for their growth. First, many did more mergers than the year before, and second, they were acquiring more business advisory firms. One client told me that “they had enough accounting work and didn’t want any more, but would certainly be interested in acquiring a consulting firm.”
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SURVEY RESULTS: It’s Now a Buyer’s Market in Mergers

HandshakeRetirements both inside and outside the firm cause problems.

By Marc Rosenberg
The Rosenberg MAP Survey

For the last 10 years or so, every year’s merger activity seems more frenetic than the year before. 2015 and 2016 continued that trend.

MORE FROM THE SURVEY: Do You Have a Firm or a Co-op? | Accountability, Equity, Compensation Are Concerns | MAP Survey Top 10 Findings | CPA Firm Revenues Rise a Hefty 8%
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Buyers are getting pickier in deciding which mergers to pursue:
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More Merger Questions Than You Imagined

Business group of two women and two men shaking handsThere’s a lot to consider whether merging up, down or laterally.

By Bill Reeb and Dominic Cingoranelli

Although we find that an internal ownership transition often can be your best bet, a merger makes sense in many cases. So, if this is the direction you are heading, we’ve highlighted some of the issues below that we think you ought to consider, with the first one being to really take a close and hard look at the compatibility of the organizations courting each other.

MORE ON PERFORMANCE MANAGEMENT: How to Compensate Your Managing Partner | The Job of Managing Partner: Empowered or Emasculated? | How the Best Managing Partners Turn Ideas into Reality | Make Accountability a Process | Accountability Requires Clear Expectations | Base Retirement on Today’s Operations

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Who Is a Likely Candidate for a Merger?

If you are going to consider a merger, which firms would seemingly be a good fit for your practice – i.e., your clients and your employees and if, applicable, partners?  The better the fit, the more likely you will be able to retain clients and employees, and the greater the chance for overall success of the merged firms.
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Merging for All the Wrong Reasons

Jigsaw puzzle with pieces missing and word "incomplete" in gapFirst: Get your house in order; don’t expect someone else to do it for you.

By Bill Reeb and Dominic Cingoranelli

For at least the past 10 years, the merger market among CPA firms has been pretty active. While the market volume has waxed and waned a little several times during this period, mergers have been a topic in almost every strategic planning retreat we have facilitated.

MORE ON PERFORMANCE MANAGEMENT: How to Compensate Your Managing Partner | MPs: How to Elect Them … and Fire Them | Partners as Role Models: The Good, Bad & Ugly | Managing the Managing Partner | Pay Varies When Performance Varies | Accountability Is for Everyone | Who Decides What?

 

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Checklist for Implementing a Merger

34 action steps. Got your signs and video camera ready?

By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide

Most firms find that it takes three to four years to fully implement a merger. But during the first few months after the effective date of the merger, there are quite a few administrative and procedural things that need to be attended to immediately. Most firms try to get as much of a head start as possible, before the effective date of the merger.
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