As an alternative to the outright selling of an accounting practice, many CPA firms might want to examine a merger with another firm as an exit strategy. A merger could allow the senior partners another three to five years of career life without the interruption of finding a buyer while also maintaining the loyalty of clients and staff.
A merger with another CPA firm also allows for easier succession planning, especially if there is some doubt in the minds of the senior partners of the viability of the firm after their departure. Younger partners may not be able to continue generating a steady cash flow which the retired partners would need for their retirement security. Having other, more experienced hands on the wheel is a good way of protecting this security.
Aside from the exit strategy scenario, merging two or more accounting practices makes sense on another level. CPA firms are offering more professional services than in the past. They may need to acquire expertise in selling and providing services like financial services and investment advisory, areas beyond their own present capabilities, while another firm has an abundance of these skills.
One final major advantage is capitalizing on economies of scale. Merging two smaller CPA firms into one accounting practice affords more opportunities for growing their combined client bases. By merging with a larger firm, a smaller accounting practice could gain access to a bigger pool of capital it needs for the acquisition of up-to-date technology. Moreover, with the increasing complexity of the regulatory environment, a larger staff of experienced staff is required to maintain an error-free, zero-defect state.
No matter the underlying reason, a merger with another firm is a delicate undertaking. The confidentiality of both parties must be maintained while mutual transparency is necessary for smooth negotiations. While it is possible for accounting practices and CPA firms to take on this process themselves, it is very wise to consider having a professional broker take on this responsibility. Loss of billable hours is kept to a minimum, an important consideration at anytime, but especially so for retiring partners with an eye on the future.