Practice Mergers – 1 + 1 must equal more than 2

We recently had the pleasure of working with a couple of firms that were considering a merger. We spent several hours reviewing and analysing core data from both firms before meeting with the parties to thrash out the pros and cons of the proposal. Pleasingly, there were more positives than negatives, although a final decision has yet to be made.

But as part of this process, it reminded me why a merger needs to be so much more than simply two firms running in parallel to each other whilst sharing some expenses. For a merger to be truly a proper merger, and a success, it has to involve complete integration of the two operations. This includes offices (generally but not always), but also client bases, personnel, systems and processes, referral networks and so on.

We conducted an extensive review of both financial and non-financial attributes, some of which included:

  • General history and background
  • Offices – current lease terms, location, size, capacity
  • Services offered – risks, differences
  • Typical fees
  • Tax lodgement numbers
  • Staffing – charge rates, salaries, charged hours, qualification, position, approach to blending personnel
  • Systems and IT
  • Fee size, growth, performance & profitability
  • WIP, debtors, write offs, payment terms
  • Clientele – size, stratas, industries, any specialisations, location, approach to servicing, age, ability to integrate across the combine firm
  • Firm name and branding
  • Equity to be held
  • Potential firm values
  • Cashflow

In our opinion, obviously the greater the differences between these, as well as other factors, the more difficult a successful merger is likely to be. But, in reality, any merger that doesn’t produce more than simply the sum of two parts, isn’t worth either the time nor the effort.


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