Use this tax season to win at M&A

1 month ago 113

While CPA firm mergers and acquisitions have become a year-round pursuit, there's no question there are some peak times for activity. Post-tax season is one of them. 

Tax season makes a big impact on the motivation to pursue a deal and it also directly impacts the probability that firms will find a successful match. The stronger the season financially and operationally, the better candidates look on either side of the table. 

Using tax season to enhance your chances for M&A success is smart business — and you still have time to get ready. Here are six steps to implement now for greater benefits later.

1. Enhance your client touch points. Each firm partner/owner should be in touch with their top 15 clients every month. Top clients need to feel your love and attention. The more you can build out the relationship, the stronger the commitment and the more secure your practice will be. 

Further, client stability and quality mean a lot to both sellers and buyers. Acquirers will want to grow relationships and know that clients are committed and used to more attention, interaction and collaboration. 

Sellers want to know the acquirer has strong client loyalty, especially in the upper tier. All good clients need to be primed so they don't feel they will suffer from a deal. The more you stay in touch, the better.

2. Exercise strong financial prudence. Many firms generate the most significant part of their earnings during tax season. Therefore, profitability must be front and center. Timely and aggressive billing is crucial. If a client is in arrears, hold off on their work or get an acceptable payment plan in place. It's a turn-off when a firm can't have a meaningful conversation right after busy season because billings were delayed. 

Create firmwide production and achievement targets and reward everyone for hitting the mark — or beating the mark. Entrepreneurialism is not as common as it needs to be. When firms demonstrate it, it creates both healthier firms and healthier M&A negotiations. 

3. Be staff sensitive. No firm has enough staff, so all firms need to optimize career conditions. Shifting hours to later in the year, programming tax extensions, and cutting back on hours while maximizing revenues and satisfaction by doing more profitable work are all going to be helpful. 
Acquirers don't want to see an exodus of their staff because they were overwhelmed during busy season. Staff will anticipate that workloads will get worse after a deal.

Likewise, sellers don't want their staff to exit because they were stressed, which may translate into clients unsatisfied with staff turnover. 

4. Provoke your infrastructure. Delegation and efficiencies are crucial to a less stressful tax season and to an easier routine. Acquirers need to understand how much more their team can take on so that they can be confident in pursuing a deal.

Sellers need to push technology to the max during tax season and keep the weaknesses of their infrastructure in mind — not only to best handle busy season but to be ready to understand their true timing and needs for an M&A deal.

5. Monitor client attitude in real time. All deals are client focused. Whether the goal is to add more services or gain more market share, all parties should understand the priorities and satisfaction of clients first. Selective surveying upon project completion will go a long way.

6. Envision changes now to prepare for later. All M&A transactions will bring change to all players involved. Everyone is looking for improvement. Keep a running list of the changes that would be helpful for your next tax season so you can assess the viability of achieving them through a deal.

Success in M&A is a function of many factors and timing is not an unimportant one. If your timing for a transaction is post-tax season, you will have lots of competition. Coming out of the season strong will help greatly. 

Knowing what to expect and how to get it will, of course, be important. The stronger you come out of the gate, the stronger your odds will be. You can always improve — and you still have time to accomplish that this tax season. 

Don't just concentrate on due dates and production. Focusing on the strategic wellbeing of your firm will produce many strong tax seasons and better position you for success.

Chief operating executive, Optimum Strategies

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