The economy’s good. Interest rates are still relatively low. Tax rates are attractive. Baby boomers are eyeing retirement. So it’s not surprising that a lot of partners of accounting firms – both large and small – are looking to expand, making strategic investments or just simply cashing out.
For example, Hill, Barth & King LLC, a regional firm based in Canfield, Ohio purchased a sole practitioner’s practice in order to give itself a foothold in Sarasota, Florida and is bringing on the individual, who has 40 years of experience, as a “senior director.” A Savannah, Georgia CPA firm, Hancock Askew, just merged with an eight-person tax consulting practice in Tampa Florida. Wilkin & Guttenplan, P.C. just expanded its New York City real estate practice by adding another local firm with fifteen employees and two shareholders to its office. That’s just a few of the dozens of accounting firm merger and acquisition transactions that occurred in just the past few months alone.
All of these transactions have different reasons behind the decisions. Some firms are looking to expand into different geographic areas. Others want to have a larger presence in a particular industry, like real estate, energy or entertainment. A fair number have, thanks to a good economy, a few extra bucks to spend and are using it to buy out competitors, add more talent or simply just expand their overall client base.
But make no mistake about it, combining firms – whether through an acquisition or a merger – isn’t easy. Or fun. There are contracts to amend, furniture to buy, leases to re-negotiate, people to hire (or re-hire) and processes to integrate. No one likes change and oftentimes these changes bring on problems. Personality issues come up, culture clashes occur and power struggles happen. This can result in unexpected departures, client losses, and unplanned expenses.
But even with all of those challenges, there’s one issue that I often see as the most daunting: technology.
That’s because different firms oftentimes have different technologies. They’ve invested in tax compliance software, client management, and document filing systems. They have long-time or ingrained financial accounting systems that they’ve been using for their clients. Their employees are used to using these systems and in more instances, than most like to admit they’re stuck using older, proprietary databases that are a bear to extract data, let alone integrate with the systems of the surviving firm. In the long run, it’s important for everyone to be on the same system. But that’s not something that can happen on Day 1.
It’s a problem that has no easy fix. But there is a path. It’s consolidation.
If you’re considering a merger with or an acquisition of another accounting firm you need to also be thinking about how you’ll be handling the transition of technology. The best solution for the short term – and possibly even permanently – is to engage a cloud hosting provider to host everything. In other words: consolidate your technology resources.
With the right host, you can move various applications and database to one firm and then rely on a single resource for security, backup, and performance. If you decide to integrate, upgrade or migrate your different systems into something else then the job will be much easier if they’re located in one place. At the very least during the transition period – which can easily last a year if not longer – you’ll be able to quickly provide access to your data to all employees, new and old and from whatever office they’re working and from whatever devices they’re using.
So yes, it’s been a busy year accounting firm mergers and acquisitions. I bet next year will be just as busy. If you’re considering a transaction like this you’ll need to prepare for a lot of headaches. The most significant will be technology, and the easiest solution is to consolidate. Move everything to one managed services company. It won’t eliminate the challenges. But it will make them easier to address.
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