In a year that is projected to record a high number of CPA firm mergers, a pair of managing partners told attendees at the AICPA Practitioners Symposium here that both parties should be prepared to navigate through changes in culture and processes that often complicate the consolidation process.

“It always costs more and takes longer,” said David Morgan, managing partner of Brentwood, Tenn.-based Lattimore, Black, Morgan & Cain, the largest firm in Tennessee, with over 400 people. “There’s no substitute for communication. People on both sides are going to have questions, and there’s usually a painful technology piece that has to be addressed.”

Morgan (pictured) and William Pirolli, a partner at Warwick, R.I.-based DiSanto Priest & Co., teamed to lead a session entitled, “Dealing with CPA Firm Mergers and Surprises.”

The 25-year-old LBMC did no mergers in its first 23 years, but completed two in the past two years, one with a 45-person firm and the other with a 40-person practice.

“The first merger took six years, the second took six months,” he said. “They didn’t realize that our firm is run like a corporation where partners have to buy stock. Another thing was that they were on a Novell system and we were on Microsoft. So everything had to be ripped out and replaced.”

Pirolli revealed that before he made the decision to merge his firm into DiSanto, he physically relocated his offices inside the acquiring firm, where it remained for three years until the deal became final.

“They finally said, either merge or get out,” he quipped. “We did as much due diligence as you can possibly do and we still had problems. You need to be prepared to change. For example, I now oversee a book of business that is larger than my whole former firm. ”
Each advised that merger-minded firms should become active in their state societies and professional associations, and get to know the players in the market. Then they should drill down to see how they treat their people and their clients and get a sense of the firm’s work ethic.

“You also have to know why you want to merge, whether it’s geography, practice areas or succession,” advised Morgan. “Because if you think you’re going to get an exit strategy and they think they’re going to get an exit strategy, I guarantee one of you will be disappointed.”

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