Are You Over-Thinking an M&A Deal?

This year so far has been a hot time for CPA firm mergers and acquisitions (M&A). Firms in the M&A mindset and process may be in turbulent times as they confront many hurdles.


Unfortunately, some of these hurdles are self-created, especially for those seeking to merge into another firm or establish an exit. Rather than waste mental and emotional energy overthinking—and risk walking away from a good deal for the wrong reasons—this is the time to turn that energy into smart thinking.


Overthinking vs. Smart Thinking

Overthinkers concentrate on all that could go wrong, including the rarest of circumstances. A misguided focus on what might happen distracts firms from nailing the vital projections and policies that matter most. We’ve seen firms jeopardize or lose a deal simply by overthinking issues that have a lesser impact on long-term success.


If you are prone to worrying, remember that some things will go wrong whether you worry or not. So instead of fretting about catastrophes, focus on what you can control. Plan now for the protections triggers that will establish a solid foundation for your firm’s future.


Smart Thinkers Will Concentrate on These Five Areas

  1. Definitions. Clarity avoids dispute and will also pave the way to intended results. Because both parties are looking to create upside, three of the most crucial definitions to tie down are New Business, Growth in Book, and Profit. Worries will drop when you have consensus on crucial definitions, especially for those on the revenue and sharing side.

  2. Job Descriptions. Transactions result in change, and the most unsettling of changes tend to be in the daily routine. Clarifying roles and responsibilities will heighten performance, avoid confusion, and generally lead to mutual satisfaction. Change is daunting, but proper thought and specifications about roles will lead to strong and effective change management.

  3. Incentives and Penalties. Many firms use performance as a meaningful way to compute partner compensation. Firms may even include incentives in the buyout program and post-buyout period. Developing practical incentives and penalties is essential to motivating and rewarding performance and aligning priorities.

  4. Financial Controls. Enforcing strong financial ground rules makes for happy partners and a healthy bottom line. Synergies and an openness to improving controls are “line in the sand” issues. Reaching agreement on billing, collection and budget controls will avoid lots of strife and trouble down the road.

  5. Planned and Unplanned Transition. Successful integration and transition is not a “flip of the switch” process. Continuity and growth of client fees will be priorities for both parties to a deal, but if there is no agreed upon approach to shifting responsibilities, as well as how they will be communicated, the continuity and fees are at risk. It is extremely important that all parties agree to a specific process for notification and coordination in the event of an unplanned event like death or disability.

If your firm is contemplating M&A, brainstorm with a business expert to keep your thinking and actions smart. Don’t assume that your attorneys will know how to address these five critical areas. Smart thinking may mean that you walk away from a deal, but at least it will be for the right reasons.



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