Adamson Advisory

Five Merger Tips to Help You Seal the Deal

Having completed five mergers while the managing partner of my firm, I learned many lessons along the way and have some of the scars to prove it. There is no question that I was smarter on number five than on the first one. Regardless of whether you are the buyer or the seller, here are few tips that will help you find and seal the right deal.

1. Average Billing Rate.

As accountants we all love to dig into the numbers on a prospective deal as we well should. To save you some time, I have developed one litmus test that should be at the top of your list. It is average billing rate per hour which is simply the billed revenue of the practice divided by the total charge hours. The average billing rate can tell you a lot of things about a practice including level of billing rates, types/size of clients, level of efficiency in performing the work, etc. If there is a significant gap between the two firms you need to quickly dig into why. My experience is that there usually aren’t quick fixes and if the difference is too great you need to take the advice of Alan Boress: “next”.

2. Sacred Cows.

In any combination of firms there is one guarantee and that is change. Typically the seller is coming into a larger firm and should expect to adopt the buyers processes and software. It’s not a democracy and that needs to be understood very soon in the dialogue. Don’t try to take the best of both firms because then no one knows “how we do it”.
I have two suggestions for you that will help both sides get through the change.
First ask for a list from the seller, in writing, of the ”sacred cows”. In other words what things, processes and people can’t be touched. It’s a good step for the seller to do to really know whether they are ready for the change that is coming. It’s also a pretty clear message to the buyer on whether there is going to be a problem or not. If it is a long list, run!
Second, as I indicated above the seller needs to commit to learn the processes and systems of the buyer and the integration needs to happen very soon after the merger date. Good ideas and better processes should always be considered. Just do yourself a favor and consider those for the whole firm a year or so after the chaos of the merger has died down. Continue reading →