Mergers are an extremely common practice in the accounting industry, as it provides one of the best options for two separate companies to grow.
Nevertheless, this remains a huge business decision and one that should never be taken lightly.
The choice of whether to merge and what company will make a suitable partner can be very complicated.
Here are the main things you should consider:
There is not an abundance of talent in the accounting profession. As such, many firms will use mergers as a method of adding bright, young new professionals to their ranks. This could be particularly important for firms looking for a successor. It is typically much easier to create opportunities for internal promotion in the months and years immediately following a merger.
Many mergers are based on one company’s desire to expand or build a new niche service. In this case, it is usually one firm with providing a quality niche service and the other with a large client base, so the merger ends as a win-win for both ends. Businesses with up-to-date technology, unique service models, or favorable operating metrics are also likely to be in demand.
Many larger firms are constantly looking to expand to other parts of the globe. Many believe they need a presence in a certain part of the world in order to build their prestige. Technology has improved to the point that having firms operate in a multi-office environment is simple, which is why we’re seeing this a lot more in the accounting industry.
This is quite a broad term, but highly important when deciding whether a merger is likely to be suitable for both parties. When deciding whether two companies have a good cultural fit, you should consider the differences in profit margins, the technology used and the attitudes to
compensating owners. Don’t underestimate the importance in whether you get on with the owners of the merging company either. It’s likely that changes will need to be made at all levels of a company following a merger and this will need to be managed sensibly. The strength of a personal relationship will play a huge role when it comes to how easy it is make compromises in a merger and for the business going forward. If a decent level of continuity can’t be agreed upon during a merger, it is often the case that clients and staff become dissatisfied and leave.
Merger vs Acquisition
On many occasions, it make more sense for an acquisition to occur instead of a merger. The main factor determining this is an owner’s desire to continue their career. If an owner plans to retire in the next five years, it make more sense for his company to be acquired rather than merged.
In many cases, a company may have multiple owners with different ages and career plans. Here, the best solution is often a ‘hybrid deal’ where one corporation purchases one or more people’s stake in the other.
At Succession Link, we make it simple to find the perfect business to merge with. Click the link to learn more about our business model.