Mergers in the accounting practice world are a good option in the current increasingly regulated environment , a realistic option for practitioners seeking holiday cover or seeking to retire, are seen as the only option to keep pace with major client growing demands and certainly a solution to small firm practitioners suffering from professional alienation. However it is generally accepted that the number of successful mergers in this area are quite low. Why?
- Loss of independence
Partners in a newly merged entity may lose part of their independence.
- Lack of compatibility among staff
Competition for promotion or management positions along with skill-sets that are not complementary may lead to strained relationships.
- Lack of common vision
An expectation gap between partners.
- Reluctance to compromise
As with all unions compromise is paramount.
- Sensitivity of clients to the merger
Some clients may feel neglected during the merger process where the partner’s time is taken up with negotiations or bedding down the merged entity.
Some pragmatic plans can be put in place to increase the risk of success
- A partnership agreement specifying capital introduced, goodwill valuation, division of duties, drawings and profit shares.
- A mechanism should be put in place for billing and collecting work in progress and paying debts owed either by the individual firms or by the merged entity.
- Agreement on where the merged entity will be based going forward and plans for disposing of the surplus property should be established early on.
- Redundancy and re-deployment of surplus staff where skill-sets are surplus to requirements should be dealt with sensitively and and with full regard to due process.
In conclusion, merging with another accounting firm may be the best way to achieve rapid expansion and economies of scale, reduce costs and be a solution to the slight image perception of the sole practitioner but it should however be appoached with some caution and alternatives should be examined closely.
John Mc Kenna is Principal at John D Mc Kenna & Co. Limited – a consultancy experienced in buying and selling accounting practices. He can be contacted on 01 9011677 / 086 8530013 firstname.lastname@example.org or www.jmckenna.ie