Business Development Adds Valuable Perspective and Process to Firm M&A

As accounting firms develop increasingly aggressive growth goals, most are recognizing the need for some form of M&A to help reach those lofty revenue numbers.  With mergers and acquisitions taking the form of potential acquisitions, mergers or professional alliances, many firms struggle with where to begin the process and business development can help.

In order to get a sense of M&A trends in relation to accounting firm growth, I reached out to Sarah Dobek, president and founder of Inovautus Consulting.  In her work with firms on their marketing and growth plans, she finds that their conversations have more frequently steered toward M&A as part of their overall growth strategy.

“All too often, we see situations where firms decide to expand their services through M&A by selecting practice areas that they think ‘sound good’ without first establishing a strategic plan that defines where the firm is headed and why,” Dobek said.

She has met with an increasing number of firm leaders who have attended conferences or have done research into M&A trends. These leaders have heard that they need to diversify and expand into non-compliance services, but many don’t know where to begin.

Dobek recommends that firms interested in expanding beyond compliance should approach a diversification strategy by spending time with their clients, deeply understanding and anticipating client needs and the direction their industry is moving.

“If firms make expansion decisions based on their own self-interests and without input from clients, the risk is trying to create market demand where it doesn’t exist, or in some cases, where the market won’t value or purchase the services,” she said.

Firms should identify practices that align with existing clients.  This approach will not only help define a natural line of business and allow you to grow with your clients; it will also help retain clients and deepen the core set of expertise already found in your firm.

The Role of Business Development in Mergers and Acquisitions

Business development professionals have a natural role to play as part of a firm’s mergers and acquisitions process.  While building firm revenue through a successful merger or acquisition may appear different than a traditional sales “win,” the process and results share many themes and traits.  The objective is to find a strategic fit that helps firms grow in a sustainable way.

At Los Angeles-based Green Hasson Janks, the marketing and business development role works closely with the managing partner and executive committee to identify and plan for potential mergers and acquisitions activity. According to Managing Partner Tom Barry and Chief Marketing & Strategy Officer & Partner, Mari-Anne Kehler, there are three main areas where business development plays a key role in mergers and acquisitions.

Strategic Planning

Barry clearly feels that business development should be involved from the very beginning of any mergers and acquisitions planning discussion; a statement Kehler agrees with completely.

“The business development professional, in our case Mari-Anne, brings a fresh perspective on mergers that differs from the way our accounting minds traditionally think about buying a practice,” Barry said.

Kehler serves as member of the firm’s strategic planning committee, which is responsible for defining the firm’s growth strategy through both organic sales and M&A activity.  Their process for identifying potential transactional partners revolves around the overall growth strategy for the firm.  The strategic committee identifies the practices it wants to develop and how they want to maintain the firm’s culture through any growth process.

“Tom and I think of the merger or acquisition beyond the numbers, looking at culture and sustainability, as well as potential revenue growth,” said Kehler.

Once the committee agrees upon the practice area to create or grow, they develop a business plan to identify and pursue prospective people or firms.  Barry and Kehler have created these business plans to resemble their sales plans for organic growth.  The plans include clearly defined targets, steps for cultivating relationships, and ideas for closing the transaction.

Kehler’s role with strategic planning is a huge advantage in the firm’s M&A planning according to Dobek. “Having a business development professional at the table for strategic planning definitely helps to reinforce the concept of aligning mergers and acquisitions strategy with client needs,” she said.

Outreach and Due Diligence

Once the business plan is in place, the firm begins the outreach process to connect with prospective partners.  Often, this outreach requires Barry and Kehler to go into the marketplace to make the introductions and shop the idea of a merger.

As the relationships develop, and a transaction seems more likely, Kehler will dig deeper to find a client perspective on what this transaction might look like.

“At the end of the day, the purpose of the merger should center around what our clients need,” said Kehler.

She will continue this due diligence through discussions with employees and clients at the prospective firm so that she and Barry can determine the cultural fit, any potential risks in merging and ROI beyond revenue numbers.

Closing the Transaction

Similar to any sales process, there will be wins and losses.  As any good business development person can tell you, it is about getting more “at bats” and being strategic in order to increase your chances for success.

Kehler has worked closely with the firm’s HR and operations departments to make sure that any people or practices that were added to the firm have the highest probability for success.  In particular, her business development role allows her to anticipate how the firm can keep both incoming clients and current firm clients happy through the process.

For Green Hasson Janks, they have had successful mergers, and they have had situations where they have walked away.  But they do not look at a transaction that did not close as a failure.  Rather, just like any sales loss, they view those situations as opportunities to learn about themselves and the marketplace.

Kehler recently performed a follow-up to a transaction that came close, but didn’t close. Through that process, the firm was able to recognize tweaks needed in future strategic plans as they continued the M&A process.

“We want to make sure that any transaction we complete will be what’s best for our employees and our clients,” said Barry. “A good business development professional, like Mari-Anne, is valuable in guiding the mergers and acquisitions process in the right direction.”

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By: Kari (Schott) Bakus, Inovautus consultant and former marketing director for Green Hasson Janks