Merger has become quite a buzz word over the last few years in the accounting industry, but is it really what people should be doing?
There are some obvious advantages of merging. Being able to consolidate infrastructure and office overhead seems to be the most apparent from a financial standpoint. It also helps to have another brain in the room to answer questions or kick around ideas.
While there are other advantages to merging, there is also a lot of work and blood sweat and tears that go into completing the deal. There is no way around it; most of the time completing a merger is a very difficult task. Practices that are similar size seem to merge with the least amount of headaches. There are concerns with compensation and workload for owners. No one wants to be working 40+ hours a week while the other partner(s) are off vacationing or enjoying their Friday afternoon outdoor meetings. Logistics can also pose a problem. In order to retain the most amount of clients the offices being merged will need to be within a reasonable proximity of one another. Individual tax clients are not going to like the fact that the office they used to go to down the street is now across town. This is especially relevant in some of the major metropolitan areas such as New York, Chicago, etc. Moving across town can mean traveling another 30+ minutes by the time you add in the extra traffic and congestion. Other problems include confidentiality issues. There is a major amount of work that goes into trying to close the deal prior to actually closing the deal and signing the closing papers. There will need to be numerous meetings, due diligence meetings etc and this may concern some current staffers. Employees may not be keen on the idea of merging or may fear that a merger may mean their current job is in jeopardy…not good in today’s economic climate. Not even to mention the legal issues that come about when actually trying to draft a contract.
Mergers are possible and can be very beneficial but can also cause some major headaches. Our advice would be to weigh all of your options before deciding on how to proceed with a merger candidate.