The Old Order Changeth

Earlier this week I learned that the Top 100 U.S. firms executed a total of 125 mergers over the course of 2015.

And those were just the ones that were announced publicly or via a press release.

If you drill down to the G400 firms (the 400 largest firms after the Top 100) that number is likely closer to 500. And again, many smaller affiliations most likely flew under the radar.

Augmenting that astonishing number of unions was the fact that there were 24 leadership changes among the T100. Let that sink in for a minute – nearly one-quarter of the largest CPA firms in the country had a changing of the guard in the corner office.

So the sometimes unwelcome tandem of succession and transition is alive and well even among the big players.

So you can imagine the fire drill going on at many of the nation’s smaller practices. You don’t need me to once again recite chapter and verse the dismal percentage of firms with a solid succession plan in place. This year, the PCPS division of the AICPA will do that for you as their quadrennial report on succession is due later in 2016.

Closer to home, the succession churn in the profession has inverted our business model somewhat as well. Not too long ago, we’d play matchmaker in the lion’s share of the M&A deals we closed and consulted on some others where the parties had already met each other.

Currently, an exponentially higher percentage of firms are picking up the phone and taking the introduction initiative themselves. And if they make the determination to merge, then they would retain us to handle the myriad and often complex details that are part and parcel of a transaction.

So for example, if we “touch” 70 deals in a calendar year, there may be less than a third of those where we made the initial introduction, where just five years ago, that percentage would have been reversed. So our role has morphed into one more consultative than transactional.

But eschewing leadership changes and evolving business models, that still doesn’t obviate the need for succession planning – if anything it amplifies it.

So whether we help your firm by brokering a merger from wire to wire, or give you guidance from the sidelines, come May you might be wise to take a holistic view of your practice to  not only determine where it’s headed in the future, but perhaps more importantly, who heads it.

Because the only thing that’s constant is change.