What's Driving M&A Activity
For many years M&A activity in the public accounting industry was primarily driven by succession planning issues. Surely, succession challenges still play a role in a firm’s decision to sell or merge, but there are many other factors that are driving the high level of M&A transactions throughout the country such as:
Difficulty in attracting and retaining quality professionals
Inability to improve the profitability and quality of the client base
Lack of sufficient revenue growth due to the labor shortage, other than through increases in billing rates
Ineffective marketing plans and lack of business development partners
Inadequate formal professional and leadership development programs for the staff and younger partners
Generalist firms with the absence of high-demand niches, specialty services, and formal integrated advisory services will lose their competitive edge in their local marketplace
Inability for the partners to agree on a strategic plan together with the necessary investments to remain independent
A partner compensation system that is not aligned to the goals and objectives of the firm
Minimal partner accountability for performance and profitability
Cross selling additional services can be a powerful way to increase revenue and retain clients. Having more to offer clients by combining resources and collaborating on new business proposals provides more opportunities for clients, partners, and staff.
Leadership issues at various levels within the firm
Denial by the leadership of the firm that competition with larger firms for talented professionals will eventually force a sale/merger at a discounted valuation by waiting too long to combine with a larger resourceful firm
Implementing progressive business decisions and strategic plans without a sense of urgency is one of the primary causes for the fast-paced consolidation in the public accounting industry.
To establish a sense of urgency, firm leaders must recognize the necessity to implement strategic goals and objectives that will continuously take the firm to higher levels of success and achieve timely and appropriate succession plans. Progressive type leaders create a sense of urgency about what is important to the future success of the firm and their partners. When leaders fail to manage with a sense of urgency then complacency, entitlement and comfort-zoners dominate the firm’s culture. Don’t let that happen to your firm’s culture. The time to act is now.
“It is not the strongest of the species that survive, not the most intelligent, but the ones most responsive to change.” — Darwin