Networking, Mergers & Acquisitions of
CA Firms
CA. N.K.Jain
The need for CA Firms to demonstrate consistent improvement in financial and operating
performance prompts key decision makers to consider routinely adding to or subtracting from the
portfolio of practice areas. Such activities stem from initiatives that include:





Extending the base of current offerings into new markets or territories
Securing new customers
Acquiring complementary capabilities
Leveraging efficiencies of scale
Streamlining operations
Whether applicable to the entire firm, a single operating unit, or a specific functional area, more of
these efforts will be undertaken, and an increasing percentage of them will be completed as
economic conditions improve. Therefore, CA Firms must ensure that the all partners are prepared
to support and facilitate merger-and-acquisition (M&A) activities from inception through
completion of requisite transition processes.
If the firm you are partner will soon be party to a merger or acquisition, what does that signify for
you, the partner or the merging firm?
Here are some strategies to help you keep your status and sanity and, perhaps, even take you to
a higher position in the new firm.
First understand that the key principle behind a merger or acquisition is to create value over and
above that of the sum of the two firms. Two firms together are more valuable than two separate
firms.
There is a chronic personality flaw that is seen in so many CAs, that unnecessarily impedes their
true success — resistance to having partners. But the secret to success in profession is not to
exclude people!Having partners is essential when you want to elevate your practice Story of
Woodcutter titled “Strength in Unity” is well known to all of us
Not long ago, experience, expertise and efficiency were key requirements for advancement.
Today's requirements include size, brand, specialization, innovation, creativity and resilience.
Develop team leadership abilities and self-reliance and be ready to act on new opportunities.
Major Concerns of M&A
What it means for you
1+1 = 3 can be a great idea for your firm but, at the personal level, things can go awry. The
merger or acquisition could mean change in job profile and your current skills may become
redundant in the new firm. New reporting system and dealing with a different work culture is also
part of the package.
But when firms join forces, every person of the firm, from the Senior Partner to the new hire is
affected. The hardest part of any acquisition is the initial part - the uncertainty and confusion.
Master of your domain: A potential clash in cultures
Fear of loss of autonomy and income are the primary concerns for merging small practicing firms.
Although they know they need to address merging issues soon—and that clients and employees
would benefit from their active involvement in the process—they are reluctant to give up being
master of their domain. They are set in their approach to managing, accustomed to working on
their own schedule, and unwilling to embrace a dramatically different role. In a merger, they
would be right—the successor firm would expect all partners to adhere to its policies. That’s
exactly where we need to address all issues relating to merger in a proper way.
Client’s Trust
Merging firms also recognize the need to properly transition the client base. Most clients don’t
have a yardstick by which to measure their accountant’s level of competency or skill. They remain
loyal out of affection and trust. That trust must be transferred from the merging firms to the
merged firms and the merging partners play a critical role in making that happen. Trust is earned
through a track record of experience, and transferring it is a process that can take months or even
years.
Change of Environment
It can be very difficult to go from an environment in which you have no accountability to one
where you do.
Loss of Brand and Staff
In most cases, the merging firm gives up a brand, location and sometimes even staff. Those
changes can make the transition more emotionally and professionally charged.
Friction
Whenever you add additional personalities under one roof, there is always the potential for
friction.
Difference in Pay Packages
If the successor firm retains staff whose compensation is different from their existing staff in a
similar role, conflicts can occur.
How to overcome?
If your firm is merging or being acquired, don't expect the transition to be smooth. You'll have to
contend with organizational chaos and your own emotions. To embrace a new firm and take
ownership is difficult when no guidelines exist.
To make this type of arrangement successful, several considerations are important. For instance:



Because clients normally choose an accounting firm based on their comfort level with key
members, personalities are important. Don’t do a deal with someone you don’t enjoy
having lunch with.
Location and fees are important. Choose a firm that will maintain a comparable
experience for your clients.
Work out all the terms in advance and put everything in writing. Agree on the roles of the
individuals and the brand names that will be used. Never agree to agree later.
To survive, chart your assignment in the new firm and handle relationships with partners
effectively by using these tips:
Take the initiative
Discuss with other partners what is most important now. An acquisition or merger can quickly shift
priorities. Have a clear idea of what kind of work you want to do. There are many factors to
consider, including your knowledge, skills, personality, values, work style and preferred
environment. Discuss these openly with all the partners.
Develop a plan
You'll weather the transition better if you have a strategy for managing your future assignment.
The plan should include goals for short term as well as long-term success. Explore different
assignment options. Developing an action plan to guide you through the ongoing process of
mergers is imperative.
Define a Position
Successful mid-size firms should seek to differentiate themselves by establishing a clearly
defined position in certain sectors of the profession. For example, a firm may opt to
 As an industry specialist, focusing on a few select industries (e.g., Builders, Exporters, Film
Industry, info tech etc.)
 As a practice specialist, offering expertise in a specific practice area or limited areas
 Service tax
 VAT
 BPO
 Risk Management
 Raid cases
 Appeals
 International Taxation / Transfer Pricing/ WTO
 Management Consultancy
 Excise & Custom, Export -Import etc.
 Mergers & Acquisitions






Project Finance
SEBI
FEMA
USGAAP and International Standards
With a geographic focus, taking a regional, national or international approach.
By client type, offering a wide-range of services to clients that fit a specific profile (e.g.,
start-ups, middle-market companies, private clients, Fortune 1000).
The firms that have already moved in this direction have been very successful. They do not try to
offer all services to all clients and maintain focused practices. Because they are more successful,
specialized practices are also in demand as acquisition targets. Mid-size firms will continue to be
absorbed by larger firms positioning themselves to go after a specific industry focus. Many of the
local mid-sized firms that have shocked the community with merger announcements merged at
their peak, not because they were in turmoil. They realized that in order to maintain a
sophisticated practice and client base, they needed to increase the platform from which they
compete dramatically to continue to recruit top associates, attract laterals and serve key clients.
Self-Evaluation
The strategic planning process is critical for mid-size firms. Although a firm may consider several
strategic initiatives to enhance its position in the marketplace, merger is one of the strongest and
more expedient means to accomplish this. Merger is not the goal of any strategic planning
process, but rather the means by which to achieve strategic goals. However, many firms
approach merger without prior planning or a clear sense of the desired end result.
Firms that consider merger should spend a significant amount of time up front evaluating their
current market position before examining potential merger candidates. Partners can properly plan
for their firm’s future only after they are in agreement about the firm’s present state. An in-depth
evaluation should address the firm’s present market position, strengths and weaknesses, clients,
competitors, market trends and firm goals. At the end of the self-evaluation, firm management
should be able to discuss the “business case” to justify the firm’s exploration of merger. This will
need to be communicated clearly to the partnership and support for merger will need to be
established. The self-evaluation should consider the following areas:



Practice: Analyze a history of representative matters and transactions over the past two to
three years. Look for commonalties that will help you spot the strengths and weaknesses of
the firm’s practice. What are the trends? Are the deals growing in size? Is the volume of deals
increasing or decreasing? Does the firm have a greater market penetration in a particular
industry sector or is it scattered? Is there an unmet need in the market for a particular service
that your firm could offer?
Clients: Review your historical relationships with your top 25 clients over the past three
years. Analyze the trends and speak with key clients. How do your clients view the firm’s
professional services? What do they perceive to be your firm’s strengths and weaknesses?
Ask about their future professional needs and make sure you are building relationships that
will ensure additional work from these clients should you decide to expand. Find out the other
firms that service their professional needs. Are your clients currently using other law firms that
you may want to consider as possible merger partners?
Competition: Who is your competitor? It may not necessarily be the firm you think it is.
Analyze how these firms have been successful and identify key factors that differentiate your
firm from the competition. Be able to strongly articulate these differences to potential merger
suitors.
A word of caution: do not expect a firm’s existing structural flaws to be resolved by merger. It is
better for a firm to address these issues before initiating any merger discussions. Depending on
the issue, merger discussions can stagnate and both sides will lose enthusiasm for what could
have been a very wise combination. It is better to rid the firm of its “warts” while in the selfevaluation process than in the midst of merger negotiations (or later) at the behest of your new
partner. Fix that formula compensation system, the unfunded retirement plan, and get rid of the
under-performing partners first. Carrying this baggage into discussions will only hurt your firm’s
negotiating position and will tarnish your marketability for future conversations.
The Ideal Partner
Once the self-evaluation is complete, your firm should develop a profile for the ideal merger
partner. The criteria for the ideal merger partner will differ for every firm. Much of this profile
should be based on your firm’s assessment of its present position today and its long-term
potential. Finding the ideal merger partner also depends on identifying your firm’s weaknesses
and knowing how to deal with them. For example, should weaker practice areas be integrated
better into the rest of the practice, or should they be eliminated? Depending on the practice, your
firm’s weaker practice may be attractive to a merger partner.
Many firms find it productive to assemble a merger committee charged with the compilation of
voluminous in-depth research on firms that meet the profile of the ideal merger candidate. The
committee should develop a manageable list of target firms, and then contact the firm’s managing
partner. By taking control of the expansion process, your firm will gain better insight into the pro’s
and con’s of various merger partners, each offering a slightly different set of practice strengths,
cultures, management styles and future plans.
Early conversations with any merger suitor should explore each firm’s self-evaluation and
business rationale for merger. If a potential partner cannot present a similar rationale, it may not
be necessary to explore further discussions. If one firm is uncomfortable with what the combined
firm would look like, then it probably is not the right match. But firms should not get discouraged
and dismiss the possibility of merger on the basis of one or two unsuccessful initial discussions.
Get the big picture
Volunteer to lead a new project: Use your time and energy wisely. If you are part of a project that
may soon dissolve as a result of the merger, volunteer for a transition team and be willing to
assume new responsibilities. This shows initiative, puts you in a visible position and builds new
skills. It also gives you the opportunity to showcase your leadership skills.
Build cross-cultural consensus and capability
As practicable, CA Firms should engage business partners to identify likely impacts that may
result from various M&A activities. Such discussions should be based on multiple likely scenarios
so that key requirements can be surfaced and evaluated across initiatives. They should also
serve as advocates for constructing and incorporating integration activity plans into the overall
planning process to stage activities, resources, and timetables as required to complete M&A.
Build a flexible workforce
Due to cutbacks in staffing and the lack of critical skills (for example, International Taxation,
Service Tax, FEMA), CA Firms should strive to ensure that Partners are technically and
functionally cross-trained. Methods to accomplish this include job and duty rotations. Analysis of
the staffing mix (e.g., in-house versus selectively sourced) should be broadened to verify that key
pools of knowledge are balanced and capable backup personnel are made available as required
to respond to business opportunities as they arise. Individuals qualified to serve as an "M&A
readiness team" (such as, two to three persons who collectively know the industry trends and
risks, business practices, and processes, technical strategy, IT trends, and risks and nuances
inherent in the technical environment) should be routinely engaged via actual and test cases to
leverage their experience and skills to provide a rapid response to M&A initiatives.
Business Impact
The ability of partners to anticipate and react quickly to M&A activities will directly influence the
costs, pace, and quality of the efforts required to undertake and complete such initiatives.
Relocation or transfer
There may be a need for partners to relocate to the new firm’s location. Informing about your
location preferences in advance will minimize the potential for gossip and spread of
misinformation.
Watch what you say about the merger
You'll receive subtle and pointed questions about your future from co-workers, friends and family.
Decide how to respond in advance. Know what information you can share and don't divulge
details that breach confidentiality. State confidently that you hope to be in a new routine soon.
Don't make negative or cynical comments about the merged firm, since judgmental statements
may hurt you in the future.
Speaking to Human Resources
The degree of HR participation is directly linked to the success of mergers and acquisitions,
therefore your HR team may have a lot to offer. Ask your HR manager about the organisations'
plan to merge people assets. You could even ask them about the functions or job profiles that are
likely to go in the new structure.
Stay current in your field
Be aware of changing trends and position yourself accordingly. Use this knowledge to your
advantage by taking a course in an up coming area or specialty that will benefit your organization
and give you an edge over competition.
Be friendly and tactful with peers
Invest in relationships and make sure you don't pick unwanted arguments with your partners
during this phase. Mergers test work relationships. Your dealings with others will take on a new
dimension as job descriptions change. Offer encouragement and suggestions.
Excel in your current position
Exceptional performance speaks for itself. You won't get ahead with average performance,
regardless of how many other steps you implement. With firms keen on expanding, the chances
are good that the number of mergers and acquisitions will only increase. That makes preparing
yourself imperative. Be ready.
Maintain your professional integrity
Knowing how to satisfy your current clients while preparing to work for another is an acquired
skill. Make decisions carefully to avoid jeopardizing your relationship with either regime. Even
simple choices may be complicated by the layers and layers of clients.
Double-check the effect of decisions where results aren't immediately apparent. You should
remain optimistic and open to new challenges and responsibilities.
Learn to be a chameleon
If your firm is being merged, you must shed your old identity and loyalty and adopt new ones
immediately. The only constant in today's workplace is change, and dwelling on the past, instead
of the current reality, will make the transition more difficult.
Assume personal control of your future path
You may be worried about position change. Be mentally tough, and make positive things happen
by taking advantage of new opportunities that come from the realignment. Participate in activities
that allow you to feel a sense of accomplishment.
Manage your emotions
Unexpected changes in work environments can throw you emotionally. If this happens, allow
yourself time to grieve, then move on. Take a positive attitude. View change as a steppingstone
to something better. Don't dwell on your loss or the past. Assume the future offers even better
possibilities. Stress comes from thoughts that may not be consistent with reality. Examine your
perceptions and take breaks.
Assume a positive leadership role
You won't score points by making difficult situations worse or by creating problems. Demonstrate
leadership skills by helping employees pull together for the new team. Don't take sides in office
gossip, spread misinformation or behave like a victim, which demoralizes others and reflects
poorly on you.
Realize that some things never change
Mission statements and job descriptions can be rewritten, but what's required of a good person
remains constant. Firms need capable professionals to handle challenges, save time and improve
efficiency.
Accelerate your networking activities
Helping peers is as important as gaining their assistance. Many partners may have to change job
profile because of overlapping of job descriptions and new priorities, not because they're
incompetent. Be aware of openings and refer others whenever possible. By being helpful, you'll
receive assistance when you need it.
Create a survival kit
Determine what you must do to remain positive and calm during this period. Participate in outside
activities that help you feel anchored and self-confident. Monitor your self-esteem and avoid
those who trigger negative feelings. Your survival kit should include people who can encourage
and be uplifting and supportive.
Recognize danger signals at work
These might include being left out of the loop or passed over for choice assignments, poor
performance reviews, negative grapevine rumors or feeling uneasy around other partners.
Become philosophical
William Faulkner wrote that "man will not merely endure, he will prevail." This is true in the
turbulent corporate world. Even if your department is being eliminated, realize you have the
strength to solve problems, create new opportunities and above all, to prevail.
Communicate, Communicate, and Communicate
If you have had problems with partners in the past, poor communication may have been to blame.
Communication is absolutely critical to successful partnering. You must be willing to let down your
guard and have both persons’ best interest in mind. Tell the others what you’re thinking, and be
receptive to the thoughts of the other person. You are a team, and although compromise is
sometimes necessary to get something accomplished, the benefits far outweigh the perceived
cost. Consistent communication is the best way to make sure the partnership is going in the
planned direction. Communication is always better face-to-face if possible.
Here are some general rules for building a partnership:
Few common stories: you get a partner, everything is great for a while and then the other person
slacks off, and you end up carrying almost all the work and still are forced to split the trappings
50/50.
You get a partner and everything works out great for while. You’re both motivated and smart, and
you share the work equally — but you both want to be in control.You both have some hang-up on
attaining power and the balance of power becomes disrupted. As soon as there’s some kind
disagreement about the future of the operation, one of you storms off swearing to never work with
the other again, and the relationship dissolves.
These are some of the unfortunate realities in the life of the professionals, but they are
necessary evils for people who are just starting out. When there are no personal assets to build a
firm from the ground up, we have to be willing to give up some control to build partnership with
others, even at the risk of something going wrong.
Nothing new here, it is the same as for friendship, marriage or family.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Try to find like minded people.
Always trust partner
Decide at the Beginning Who Will Work on What Tasks
Feel Respect, Get Respect
Blame yourself first
Be willing to give new partners the benefit of the doubt, especially if don’t know them yet.
Encourage communication and run all your important ideas by them.
Be self-directed and take independent action day-to-day for the benefit of the Firm;
expect the same from your partners.
Be open and honest about how you feel — but do it constructively and for the benefit of
the team.
Try to keep the balance of power equal at all times. Ensure no one abuses their power.
If you feel the balance of power is shifting either someone is taking too much or someone
is participating too little, act quickly and assertively to resolve the problem.
When it’s time to dissolve the partnership make sure you have everyone’s, not just your
own, best interest at heart.
As you make your New Year’s resolutions, resolve to take control of your firm’s future in a market
that is re-defining itself. Develop a focused strategic plan for your firm’s future growth, and
consider merger as one way of realizing your business goals. Often mid-size firms are reluctant to
be acquired or merge because partners fear losing their independence and autonomy. While a
merger does bring about change, a CA firm merger is not a corporate takeover. The merger
process introduces two groups of partners to each other’s core values, practice philosophies and
management styles. When done correctly, the combined firm takes the best from both firms and
emerges as something better.
Keep events in perspective and expect some unpleasantness. Periodically weigh the pros and
cons of your merger. If negatives outweigh positives after the merger, it may be time to rethink
your action plan. Explore all your options before deciding to de-merger.
***