Merger Deal Killers

Source: Practical Accountant

Firm merge up so they can:

• Improve their ability to hire new staff.
• Keep up with technology.
• Ease the burdens of regulation.
• Provide more services to clients.

In many cases the above reasons are so compelling, the firms must merge. This may ultimately cause a decline in CPA firm values. It also may be causing many firms to enter into deals they should avoid. Deal breakers should be anticipated early in the negotiations so bad deals can be avoided without too much wasted time. Some factors that lead to failure are:

• Incompatibility.
• Bad chemistry.
• Mismatched compensation philosophies.
• Disparate earnings.
• Different philosophies on management, equity, client service, and ethics.

The best mergers involve synergy. The upward merging firm realizes not only the purchase price, but better productivity and earnings from higher leverage and more services to its clients.

Attorney costs can be controlled in the merger process if the parties sign a letter of intent prior to engaging attorneys.

An orderly transition plan will not only help prevent failure, but will save time and expense as well.

For the complete article, click here and select the article Having the Right Merger Mindset.

From Practical Accountant, November 2007, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.