Mergers

Mergers are too often overlooked and misunderstood. Yet they provide all of the benefits of a sale or an acquisition of a CPA firm with very little cost, and few, if any, tax ramifications.  

Benefits to the Smaller Firm

• Relieving the smaller firm of many financial, administrative and human resource  responsibilities
• Access to technical and managerial support
• Keeping ones existing book of business
• Offering clients additional services and resources resulting in increased billings
• Growth of firm tied to larger firm, not limited by size of smaller firm
• Built-in Exit Strategy upon Retirement, Death or Disability

Benefits to the Larger Firm

• Provides a proven pool of talent
• Access to a loyal client-base for cross-selling opportunities
• Access to New Markets and/or Services
• Increased Cash Flow and Profitability
• Economies of Scale
• No Cash is Required

Partner-level Professional for Exit Strategy

Benefits to Both Merger Candidates

• Mergers are easier and less expensive from a legal perspective
• May be a Tax-Free Transaction for both Parties
• Ability to Attract Larger or Different Clients
• Attract Superior Staff with Larger Firm
• Enjoy more professional opportunities and resources
• Increased profit for both parties due to economies of scale
• No cash required by either party, except brokerage and/or legal fees
• Built-in Exit Strategy
• Quickest and least-expensive expansion strategy

Mergers Solve Common Infrastructure Problems

• Rainmakers – This limited resource is difficult to replace but essential in a market characterized by fierce competition for clients
• Technicians – Whether entering a new market or expanding existing services, good technicians are always a valuable asset
• Quality Control – Top firms are always looking to improve quality control and thereby their competitive edge.
• Management & Administration – Many mid-size firms suffer from a lack of management and administrative infrastructure. Merging can provide a viable solution.
• Excess Capacity – Many firms suffer from excess capacity outside of tax season. Merging with a firm that provides year round cash flow is a common motivation.

Structuring Creative Transactions

Mergers lend themselves to creative transactions that can lead to a win/win for both firms. Some of the important issues are listed below. Perhaps most surprising, is that mergers usually include the potential for a larger compensation package for the smaller firms’ partners, while a larger buy-out for the larger firm’s partners.

• Keeping their own PA or Not
• How each Partner’s Book will be handled
• How will Growth and New Leads be handled
• Billable vs. Non-Billable Hours
• Responsibilities
• Voting Rights
• Salaries
• Distributions
• Benefits
• Allocation of Equity/Profits
• Capital Contributions
• Who will be Managing Partner
• New Firm Name
• Location(s)
• Settling Disputes
• Outside Commitments
• De-merger Agreement
• Expulsion, Death or Disability of Partners
• How New Partners will be Handled
• Exit Strategy: Price and Terms upon Retirement

Call us directly, or our Live Chat line, to discuss your merger questions and/or objectives.