[IMGCAP(1)]Oscar Wilde was certainly not thinking about accounting firm mergers and acquisitions when he penned his farcical comedy, The Importance of Being Earnest. But, the message in the title is abundantly clear for any CPA firm considering such a transaction.

Many accounting firm deals suffer from a lack of urgency and readiness to meet the related demands. The principals frequently do not grasp the importance of being earnest; namely, of being prepared, enthusiastic, committed, serious, focused, realistic, driven and engaged. These deficiencies can promote, among other things, damaged relationships, eroded trust, decreased deal value, lost personnel and clients, and quite possibly deal collapse. Here are some areas of recurring concern.

Time: There is an old adage in the merger and acquisition world—time kills all deals. Transactions are time consuming. Period. Unless the parties are fully committed to investing the requisite amount of time to plan, investigate, structure, negotiate, document and execute a merger or acquisition, the results are likely to be nothing short of disappointing. Failing to dedicate the necessary hours to rigorously work the transaction usually elongates the process.

The longer it takes, the greater the likelihood that other priorities and pressures will creep in and possibly take over. The parties will lose sight of the positive aspects of coming together and may question whether they should abandon the transaction altogether. Inefficiency, including the frequent refreshing of memories, will dominate; and new issues or the retrading of old ones will emerge. Finally, a transaction that takes too much time commonly contracts deal fatigue—an insidious condition marked by frustration, anger, irritation, impatience, distrust, doubt, resignation, indifference or simple exhaustion.

Vision, Strategy and Tactics: Each party needs to invest in creating a clear vision and set of strategic objectives for the transaction and its outcome. There needs to be a solid understanding of how the acquisition or merger fits, not only into the long-term goals of the organizations, but tactically in the current state. This mandates an understanding of the desired and potential value of the transaction on both sides of the ledger. These are not matters that can be murky, discovered along the way or left to chance. If vision, strategic objectives and tactics cannot be succinctly and persuasively articulated and communicated at the start of discussions, it should probably be back to drawing board. Dedication to do the necessary work upfront to identify the benefits of a transaction and how it will come together is a must. Granted, hidden gems may go undetected if there is too much structure, but this tends to be more the exception than the rule.

Sketching out the vision, objectives and tactics of a transaction is the opportune time to uncover the true “must haves” and “deal breakers.” While this should be a short list, as almost anything can be negotiated, it is a good practice to know, communicate and attempt to resolve these “deal killers” early on. Discovering these along the journey, when the parties are fatigued, often leads to more delay, disappointment and ill-will.

Team and Talent: Enthusiasm, vision and time alone are not enough to bring a transaction to conclusion. There needs to be the right team and talent. The “point person” who is making the key decisions and shepherding the deal cannot do it alone. Individuals responsible for developing the strategy, culling the prospects, performing the financial analysis, refining the terms, overseeing the due diligence, negotiating the final agreements and creating an implementation plan must be in place. If a single individual is assigned all of these tasks, chances are the outcome will be suboptimal and progress will be significantly slowed. In addition, regardless of whether the team consists of internal talent or outside consultants, the transaction cannot be a hobby to be worked in their spare time. It is essential that the team is dedicated, and the deal is a priority - something to be pursued in earnest.

Leadership and Temperament: Needless to say, completing a merger or acquisition demands a special leader; and one with the right temperament. In particular, a person who can identify and stay focused on what is truly important, allow the more minor issues to fade away or be handled by knowledgeable team members, and move the transaction along a speedy path. Further, transactions require a leader who can remain objective, unemotional and business-like, demonstrate maturity and composure, and be present, engaged, enthusiastic, and committed to completing the transaction. Like all impending changes, merger and acquisition transactions are marked by uncertainty, particularly at the lower levels of the organization where information is often scarce. During a protracted deal process, there is a real risk that the tolerance for ambiguity about the future will reach the saturation point and key personnel will find more certain employment elsewhere. This alone should keep the needle on the earnest meter high. Leaders of an acquisition target also need to remain engaged and be ever vigilant in monitoring firm morale and sensitivities, and be prepared to dispense reassurance and encouragement on a regular basis.

The Final Act: As we know, Wilde’s play is a twisted comedy about Jack, an English gentleman, and his alias and alter ego, Ernest, who struggles with being e(E)arnest. His betrothed, Gwendolen, muses about her long-held desire to marry a man named Ernest because “there is something in that name that inspires absolute confidence.” After much hijinks, Jack/Ernest’s last words are, “I’ve now realized for the first time in my life the vital Importance of Being Earnest.” For those embarking on an accounting firm merger or acquisition, the moral of this story could not be any more clear, timely or noteworthy.

R. Peter Fontaine is the founder and managing partner of NewGate Law, Ltd., which provides a broad range of legal services exclusively to the accounting profession. Prior to forming NewGate, Peter was the general counsel at several large accounting firms. He can be reached at pfontaine@newgatelaw.com.

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