I admit to feeling a bit nostalgic this time of year, and it’s not just because of the holidays. It’s because my email inbox is stuffed with news about mergers as firms rush to finalize their deals before Dec. 31.
There is a strong sense of loss that IPA feels, as part of the accounting community, when good, independent, local firms that have been around for many decades announce that they are merging up – regardless of whether the reason is a good strategic one, or simply because partners want to retire and no one is ready to take the reins when they do.
Now there are excellent reasons for many of these unions: succession for firm owners, a bigger, more talented staff, new marketplaces, new niches, the ability to expand existing services and more promotion opportunities for staff.
But the downsides are real too. The first year, at the very least, has the potential to be extremely disruptive for everyone involved. New systems, technologies and processes have to be integrated and learned; offices may need to be moved; partners and staff can both take an “us versus them” approach to the merged entity; redundant staff may be laid off and concerns about future layoffs may remain; accounting associations lose members; clients may not want to work with a much larger firm; and small local business serving the acquired firms may lose that firm’s business. Increased communication – which is needed to set and manage expectations on all sides – may not get the attention it needs.
While mergers are here to stay, and are becoming more common within professional services firms (and, not surprisingly, within client organizations too), it makes me wonder: Should firms be built to sell, or built to last? Should both options constantly be on the table? And how many firms have truly chosen their path?
Firms continue to be courted with offers. Many tell us that their partners have determined to remain independent and have therefore not seriously entertained acquisition offers. Others choose the fast-track toward merging. Still others revisit their options constantly to read, and re-read the tea leaves of the current environment to see which way to go.
Now don’t get me wrong, it’s perfectly OK to keep an open mind about the future of the firm, but I believe that a concrete decision – either a strong Declaration of Independence or a decision to ultimately sell – will take the firm down two separate roads. Those that have made their decision – regardless of what it is – will find it easier to have all partners pulling in the same direction and reaching their goals faster and with less friction. Those that haven’t may find that time and energy is wasted while aiming for a fuzzy target that not everyone understands, agrees to or even favors.
My take on all of this? Bigger isn’t always better. The grass isn’t always greener. Reality doesn’t always live up to the promise. IPA would not be sad at all to see the volume of merger announcements slow down to a trickle.
As we roll into 2016 with more mergers on the way, my plea to both the acquirer and the acquired is to do everything you can to ensure that one plus one is significantly greater than two (or three, or four or five). Only then will the continued merger mania deliver the value-added hype that has gripped the profession. You owe that much to your partners, staff, clients and the profession.