Roadblocks and Solutions when Merging Firms

Whether you’re absorbing a smaller firm or teaming up with a like-minded owner who shares your vision for the future, merging CPA firms is an exciting journey lined with pitfalls every step of the way. Having been through both, I’d like to share what I got right and where I’d do things differently next time.

Prepare to Not Be 100% Prepared

No matter how much due diligence you do, you’ll never fully know what you’re walking into. The clients, the team, the true financial condition, the culture—there will be surprises. Be ready to flex and face the unknown.

Do your best to vet the owner’s values above all else. They are representative of the people they hired, the clients they chose to work with, and the culture they built. The more values you share, the easier the transition will be.

Know Who You Are Before Acquiring or Merging

Of course, the above exercise is difficult to complete if you have yet to establish values at your current firm. We made this mistake for our first acquisition.

 
An opportunity presented itself that we couldn’t pass up, but in retrospect, we should have defined our culture before taking over the other firm. Everything worked out in the end, but it was difficult to help our new team members do things “our” way when we hadn’t figured out what those ways were.

For our merger with Boulder Valley CPAs, it was an entirely different experience. We had a clear picture of who we were and who we wanted to grow to be, which made it possible to find a partner with the exact same vision.

Dealing with Duplicate Departments and Roles

Even when two firms go together like peas in a pod, you are going to find there are multiple peas in the same position. I’m proud to say that we never had to let anyone go due to redundant job duties. 

Instead, we moved people around to get everyone in the right seat for their skills, preferences, and career goals, creating new titles when necessary to make it all work. To do this, you need to identify each team member’s core competencies and find out what people love. Ask them, “What is your favorite part of your day?” and do what you can to put them in a position to tackle that responsibility.

Be aware that people may fit differently into the new reality. For example, someone who excelled at managing a team of three might work better as an individual contributor on a team of ten. You need to recalibrate for everyone.

Note that once restructuring is complete, you need to share the new hierarchy with your team. It’s better to overcome a little bit of friction in the beginning rather than deal with long-term confusion and tension.

Start Team Building Immediately

Following our merger, we made the mistake of believing that just because our cultures were the same that our teams would naturally integrate – but getting familiar and comfortable on a personal level is different from sharing core ideals.

It wasn’t until we implemented targeted team-building efforts that our teams truly became one, and I wish we had done it sooner.

Managing Owner and Client Expectations

When acquiring or merging with a firm where the owner is the primary CPA, you must have a change management strategy in place, both for the clients and the owner.

Understand that what clients are used to in a smaller firm can be very different:

• Accustomed to always having access to speak with the owner
• May only work with the CPA
• Receive free advice and services outside of scope

Change can be difficult. To keep clients happy, find a graceful way to make the transition. This means first having group meetings with the owner and the new team member who will be serving the client, and being sure to instill confidence and transfer authority. Say things like, “You’re going to love X, because they are great at Y!”

A mindset shift is needed for the owner as well. It can be difficult and uncomfortable to disappoint clients. Help them understand what is better for them and their business.

Quick Post-Merger Checklist

Prepare yourself for a certain percentage of client attrition. No matter what you do, some clients will prefer to navigate change externally, but here are tactics that can help you keep more of the book intact:

• Prioritize meeting every client you wish to retain – do not presume retention, and do not trust clients to read and internalize written notifications regarding the merger
• Go through each client’s engagement to get on the same page and make sure nothing slips through the cracks
• Focus on knocking their socks off with a WOW client experience before raising prices, even if the previous firm was undercharging for services

You can’t simply tell clients why their experience with your firm will be better. You need to show them.