When Should A Small Practitioner Merge Into A Larger Firm?

Succession: Most smaller firms do not have a succession solution internally. For those firms, it is an obvious and important matter to secure your succession with an external firm.

Cross selling, growth. There are many niches out there and many smaller firms have clients that may be receptive to certain niches but lack the time, knowledge, capacity and, or licenses to deliver. Also larger firms may enable you to attract additional clients.

Back up, security. Many small practitioners fear the risks associated with short and long term disability, death, the desire to go away on a vacation and have someone watching the fort.

Whom to merge with:

While the above are basic, simple facts, with whom to affiliate is not as intuitive. Bigger is not always better. There are several things you need to consider:

Capacity: If you are merging to cross sell, for succession or for helping your staffing solutions, be sure they have the excess capacity to handle the issues or your merger may not be successful..

The ability to keep you happy, retain your clients and when appropriate, your staff:  As I have been known to say for years, if you don’t want to eat lunch with someone, don’t merge with them. Your clients are comfortable with the fee schedule, location and methodology of service you provide them. You need to ensure that can be reasonably continued in the successor firm.

Handholding: Smaller firms do a significant amount of handholding with their clients. Many large firms only do a limited amount. You need to make sure there will be the level of handholding your clients have become accustomed too.

Bigger is not always better: An upstream merger is not necessarily you merging into a 20 + partner firm. Many times a merger by a small firm is a merger into a somewhat larger firm in the amount of people, not necessarily suddenly going from a sole practitioner to a national firm. Smaller firms will have fee issues, accountability issues, philosophically run their practice in a way a larger firm cannot so you need to find a firm larger than you but similar in other facets to your culture.

For more information and greater detail on this important topic, click the link below be accessed to an article from the AICPA Small Firm Solutions newsletter on this topic.

http://www.transitionadvisors.com/articles/when_should_a_small_practitioner_merge_into_a_larger_firm_fall_2008.pdf