Above all, better is better!

As a former boxer I’ve certainly taken my share of punches and on rare occasions found myself in the unenviable position of staring up at the ceiling and wondering why I happened to be on the floor.  For those who know me well, I dare say they would probably put the connected punch count much higher than my conservative estimates.

Heading toward the tail end of last week it felt like I made an ill-advised comeback to the squared circle, when a merger that I would have gambled a large portion of my 401(k) on it closing, fell apart at the 11^th hour, with the disappointment over the collapse hitting me like George Foreman in his prime.

Now I certainly understand that mergers, like any business transaction, carry an inherent risk of not coming to fruition. In fact, a sizable number will, in all likelihood, not close. However,  since several of our principals spent the entire summer either handholding the seller firm or answering what seem like hundreds of questions, it nonetheless made it that much more painful.

The great Green Bay Packers’ coach Vince Lombardi perhaps put it most succinctly: “The disappointment over losing a game is directly proportional the energy expended trying to win it.”

I won’t bore you with the reasons behind last week’s non-merger and in the context of today’s missive, it’s not all that important, but let’s just say another successor firm dangled an offer that they collectively felt they couldn’t refuse.

I listened politely to the partners as they briefly explained their decision, resisting the temptation to ask them why the eventual successor firm didn’t make the offer that was eventually accepted  - from the get go  – waiting instead to hear what other suitors had initially brought to the table before sweetening the pot. The result was a bigger firm, which was certainly not atypical – especially in an upstream merger.

Obviously, M&A accounts for the majority of our requested client services and considering we’ve overseen the closings of roughly 1,000 CPA firm mergers in our company’s history, we consider ourselves fairly knowledgeable on the subject. And one of the axioms that we continually preach to clients, or attendees at our many CPE sessions throughout the year, is that bigger isn’t always better. Better is better.

Please excuse the reverse cliché, but size doesn’t always matter. We stress the four C’s as cornerstones to any successful affiliation – chemistry, culture, continuity and capacity. If one or more are lacking when the contracts are signed, then fasten your seat belts as it may be a bumpy ride. To be sure, size may figure into it, but not necessarily.

I’ve seen too many examples of firms merging for sheer size that are fraught with problems and obstacles. There was one such merger several years ago, that is still working out the kinks. I’m sure many of you could cite examples as well.

It will be interesting to check back on the status of the two firms a year or so from now. It may very well turn out to be the best option for all involved. Or, you may hear frequent water-cooler mutterings of “shoulda, woulda, coulda.”