Mergers are fun – and then the real work begins

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I love to take on projects bigger than me. All CPAs love to take on a challenge – because that is our industry. Trying and failing is better than never trying. As I meet other CPAs, I realize we all share the change experience.

Some of my fun, challenging projects in the 1970s included building my own HeathKit TV and stereo systems by starting with each component. Follow the step-by-step instructions, learn to solder transistors, resistors, and power supplies. But what if I put it all together and it does not work? That is a very intense moment. Plug it in – will it work?

Fortunately, apart from the instructions, the TV came with an even bigger book on repairs – an extra manual on how to diagnose and fix any problems.

If we follow all the right instructions to build a larger accounting firm based on a plan and it does not work right after the merger, then we need to think about how we can fix it and get back to 100 percent.

Over the course of my career as a CPA firm owner, I have had a few mergers, retirements and de-mergers. One of the first chapters in my repair manual for accounting firm mergers would be called, “Recalling the deal, communication, and personalities.”

Chapter 1

In the merger talks, there is much effort around building the new firm and structure. There are a lot of discussions, memos, and conversations. All that face-to-face work helps develop great relationships and understanding differences. We know what we like and don’t like about our personalities, business goals, and operation differences. What did we decide we would do if issues came up and we could not agree? What is our fallback?

We should never procrastinate; when the need is present to deal with an issue – deal with it.

I would encourage CPAs to find more time to communicate. Communication is the only way to solve issues. Get out to lunch, meet late in the office after daily office stress is over, or meet early for breakfast – just to talk. Spend time developing the relationship as well and finding common ground.

The following is certainly not a complete list of issues and problems that have come up around the deal, communications and personalities -- it is a list of issues I and other CPAs that I have consulted with have run across.

Merged partner retirement

Issue: The agreement calls for a full-time working period, a transition period, and/or retirement. Sometimes these can be with options to extend and continue. I think it can be difficult for a retiring partner to turn away from clients and involve other staff, but it has to happen for the firm to continue.


  • Make sure all clients and staff understand the partner is on a retirement track.
  • Agree on a retirement notice and mail it to all clients and referral sources.
  • An employment extension option should be only for the benefit of the firm.
  • Push for timely client transition, and if need be, force it for the benefit of the firm.
  • If an employment extension option is granted, make sure the retiring partner has given up all client contact work.

Merger agreement disagreements

Issue: Sooner or later, something will come up that was not in the agreement, or detailed enough, or a change in plans is mandatory. Don’t hesitate to discuss these issues -- do not procrastinate.


  • Keep all differences in the conference room only. Voice concerns privately and discuss them in private.
  • Allow both sides to discuss and allow for movement and change to solve.
  • Review prior notes, emails, and letters of intent for guidance when the agreement is in question.
  • Both sides can continue to win when all issues are allowed to come to light.
  • If financial targets are not being met, be willing to share financial data and adjust so the different sides agree on compromises.

Sole practitioner mergers

Issue: My experience is that when merging in a firm owned by one owner, it may be hard for a sole practitioner to release sole control of the firm and the future.


  • The goal is to build a village and not individual practices; continue to push village.
  • Develop and review guidelines and policies that partners should follow to build a village.
  • Develop firm branding and logos, marketing literature, websites, voicemails, and email signatures that identify the firm above individuals.
  • Have the new partner take different staff to client meetings and expand individual efforts to village efforts.
  • Make sure all new clients know a partner and one or more staff. Explain to new clients that knowing more staff provides better service.
  • Set partner goals and incentives based on building a village.
  • Have an open house so new and existing clients and staff get to experience the new village.

Engagement letters and setting pricing

Issue: All pricing amounts were reasonable in the merger study. But as time goes by, it is apparent that non-profitable jobs continue and partners are not dealing with the costs and rates of a larger firm. Staff continue to prepare meaningless amounts of additional workpapers.


  • Set up sample binders of client workpapers, including required workpapers. All other workpapers must be approved by a partner or manager.
  • Set up a pricing committee and review client writedowns.
  • Send engagement letters out to 100 percent of all client projects.
  • Incentivize partners and managers to get jobs complete in time budget, or explain time overages.
  • Managers should oversee staff in enforcing consistency in all projects. They should bring teams of employees together to set up workpaper consistency policies.
  • Spend time with clients explaining project fees prior to beginning work. Try getting non-profitable clients into a two- or three-year contract with increased fees and reasons to stay with the firm. Build a team with the client to get better coordination and assistance from client to provide better recordkeeping.

New staff working together

Issue: Mergers always have staff coming and going. Every person has a different personality and can offend others.


  • If disruptions appear, spend more time in group events, building the village.
  • If it is obvious that it is between two people, try to get them to meet together and help them understand the different positions and personalities.
  • If a partner upsets several people, plan a session with the partner to demonstrate the issues. Ask permission to address these issues with that partner.
  • Keep all partners thinking positively about building positive staff relationships. Focus on positives.
  • If parties cannot work together, try personality assessments to gain insight for organizations with diverse personalities.

The firm is No. 1

Issue: The most important job of the merging firm is to transition all clients, especially if a partner is retiring.


  • Send out merger announcements, with an emphasis on firm.
  • Retiring partners must introduce all clients to a new partner.
  • All meetings and phone calls must include a staff member who is taking over the client relationship.
  • Use calendar invites as a way to always include the new client relationship staff in meetings and scheduled telephone calls and copy them on all emails.
  • Have a firm open house – get clients in to meet all staff.
  • Incentivize retiring partners by meeting transition goals.
  • Celebrate the firm!

It is all about communication

Issue: The new firm should be working smoothly and all parties feel a part of an exciting firm. If tensions, fractures, or just plain boredom sets in, get back into communication mode.


  • Call monthly breakfast or dinner meetings.
  • Have special events to bring all staff together and build trust and fellowship.
  • Handout logo-branded coats, bags, or shirts.
  • Continue communication around the positives of the merger for all parties.
  • Deal with differences quickly.
  • Set specific corrective acts and discuss all possible issues and options to move back to goals.
  • If the merger includes retirements, communicate the intent and plans to staff, clients, and the world.
  • If a merger brings in a sole proprietor, make sure time is spent on building a village.
  • When issues come up, make sure all partners are prepared to evolve and learn.
  • Spend time on building a good relationship with all staff.

I would love to hear from you about some of your issues and solutions. Keep merging and expanding – it is worth the time. I love exchanging ideas to find out how we can help each other. Email me at joel@osgroupcpas.com.

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