Merger Option in Succession Planning for CPA Firms

Terrance Putney and Joel Sinkin, of Accounting Transition Advisors, talked with IPA about mergers as succession planning options. Here are some highlights:

• Merger may be necessary when business-producing partners retire and there is no one to fill those roles.
• Investigate partner compensation disparities, which may indicate the two parties are incompatible.
• The compensation method should not perpetuate distinctiveness of two separate firms.
• A committee charged with making compensation recommendations should include people from both firms.
• Create the transition plan before the merger, not after. The plan should include:
  • An announcement letter.
  • Determination of who should get a visit as opposed to a phone call or letter.
  • Help for retiring partners in making the transition.
• When merging up, consider:
  • Does the new firm have the staff and resources required to continue functions of retiring partners?
  • Mergers often fail because personalities are incompatible. Make sure people are compatible before you merge.
  • Are partner compensation levels comparable? Are you willing to tolerate disparities to create a more profitable firm in the long run?
  • The following can lead to a breakdown of the merger: firm location, incompatible billing rates, new name, client service philosophy, roles of partners after the merger.