Russell Shapiro Published in Accounting Today: Key Considerations, Potential Pitfalls in M&A Transactions
May 21, 2018
LP Corporate and Securities Partner Russell Shapiro was recently published in Accounting Today. The article, titled "Key Considerations and Potential Pitfalls in Accounting Firm M&A Transactions," utilizes Russell's knowledge of accounting firm mergers to inform readers about partner dynamics in merging up a firm, seller due diligence, client list sharing, and retired partner issues, among others.
From the article, regarding a merger of equals:
"Mergers of equals often involve additional and more difficult issues. By equal, I mean two firms where the smaller is half or more of the size of the larger. In these cases, the negotiations are often protracted because in essence a new, third firm is being created. There is a lot of discussion around governance as there will be power sharing at every level. There may be compensation protections. There will be burn-off periods for the power sharing and compensation protections.
If the firms have different capital and retirement systems, they will have to be reconciled and there is often grandfathering of certain payment rights for partners who are close to retirement. All these changes result in a new partnership agreement.
Firms, when embarking on the process, often hope to use one or the other firm’s partnership agreement, but I have never seen it work out that way — a new agreement is always required for the reasons mentioned. This is all in addition to the regular transaction considerations and due diligence on both sides, including what software to use, harmonization of manager/staff compensation and billing rates. Furthermore, the partner dynamics become even more acute as partners try to maintain their positions. And sometimes, the most thorny issue, believe it or not, is what will be the new name."
To read the article in its entirety, see Accounting Today's website here.