CPA firm M&A has historically been a prime avenue for accounting firm succession. M&A is also a proven mechanism by which the successor can achieve growth without needing to invest time and money into marketing. But now, with labor pressures being what they are, the historical proposition is not working as well.
In today’s market, M&A needs to bring important entrepreneurial progress to make a transaction viable. Deals between CPA firms must produce the following benefits to stand a chance of success:
Leadership. Current owners and leaders must be freed from performing low ROI functions, and opportunities to promote to partner must be a realistic outcome of the deal. The transaction must allow for better mentoring of leaders and better career satisfaction. No party to the deal wants to end up with more problems for the same dollars (or worse, less dollars). The transaction must promote improved lifestyle and finances. New leaders need to be enticed to become owners and partners because the deal will present a job description that works, and possibly even a flex-time or fractional role.
Talent. A transaction needs to add expertise and position the parties to be able to spend more on people. New and expanded methods to develop talent must be achieved in the near and long term. Synergies in personalities must be at hand to make change easier to implement and excitement more contagious.
Market presence. All parties need to be confident that the deal will result in more sophisticated clients, a wider and deeper service offering, and significant buzz in the markets that are important to the firm. CPA firms often combine through M&A specifically to “lock up” a geographic area—or move into others. A combination can be used as a strategy to make the competition disappear.
Efficiencies. The best practices and expertise that both firms have must lead to greater efficiencies in engagement performance and firm administration. The merger should result in improved purchasing power in many ways, not the least of which would be for offshoring and technology.
Technology. Automation and advanced processing and systems need to actualize on an accelerated basis. The combination must allow all parties to have more rapid access to databases, metrics, practice management, client communications, and project management. Leading-edge must become standard, and trendsetting must be the goal. People must be freed up to perform spontaneously and find the technology to drive better job satisfaction and quicker turnaround.
The new paradigm for a successful deal is that it will make the CPA firms better businesses. If in the process, succession and growth with little marketing is also achieved, that is a plus—but growth alone is no longer the driver.