Ten steps towards a successful merger

Guidance and Ethics, Practice Management 03/07/2015
  1. Know why you want to merge and set a merger strategy – ask yourself why you want to do it, what you want to achieve, and what you are prepared to do to achieve it. There are right reasons and wrong reasons. Some of the right reasons might be to:
    • Enhance the competitive position of both firms
    • Add complementary practices or services
    • Increase or diversify client base, and
    • Allow development of specialist areas.
    • Some wrong reasons might be to solve economic problems, to deal with internal problems, or problems in the existing partnership.
  2. Know your own practice – you must carry out a comprehensive honest and objective assessment of your own practice, clients, employees and opportunities. Do it as a SWOT analysis (strengths/weakness/opportunities/ threats) of your own practice. Ensure your target does the same.
  3. Get help – it is well worthwhile engaging outside involvement to assist the initial discussions and to drive and oversee the merger. An outside facilitator (who should be disinterested and have no professional relationship with either firm or no prospect of one with the merged entity) is more likely to have an objective view and be skilled in setting action points and deadlines for the progress of the merger talks, and then the merger. Agree a cost in advance and who is to pay it!
  4. Evaluate the merger and identify key issues and deal breakers early on – both sides must know in advance if there is a synergy between the merging firms. Identify shared values and goals. Identify each other’s weaknesses and strengths. Do a SWOT analysis of the merger. Identify the key issues. Identify the potential deal breakers and get them out of the way early rather than waste time.
  5. Do a full financial analysis – a full review of detailed historical financial data must be carried out. If the facilitator has an accounting/financial background, they may be of assistance and may be independent of each side. Through historical analysis, you will have a clear picture of what each side can bring to the table, and this will assist in developing projections and cash-flow plans for the future of the merged entity and in setting financial policies. Prudent planning should provide that, in the initial months of the merger, cash flows will be less than the aggregate of the pre-merger average of both firms.
  6. Conduct a file and claims due diligence – it is essential that a proper file and claims review and due diligence are conducted, so that each side is satisfied that there are no skeletons in the closet of the other that will create problems in the merged entity. Any problems identified must be notified to the appropriate insurer. Do not be afraid to ask the hard questions.
  7. Make a decision – once you have your information, decide to progress or terminate. It is pointless to procrastinate, and the deal will lose momentum.
  8. Communicate and plan for what will happen when the merger becomes official – once the integration plan is set, people will be asking questions, and it is far better to communicate early and effectively with staff members and key clients to put their minds at ease, quash rumours, and bring them fully on board with the merger.
  9. Invest in the merger – be prepared to make changes in your own work practices, and be prepared to spend money.
  10. Use the marketing opportunity – a successful merger is good news. Use the opportunity to spread the good news and to market your new practice and the enhancement of service that you can offer.