Merger Strategy: Guidelines for Growth After Combining Professional Services Firms

First and foremost, M&A deals encourage sustainable growth by pooling resources, expertise, and client bases from multiple firms, leading to enhanced competitiveness and a stronger ability to meet evolving client demands in today’s increasingly consolidated market.

The proof is in the numbers: M&A deals among accounting and legal firms surged between 2019 and 2020, driven by heightened interest from private equity firms.

The M&A process is incredibly delicate, however, with firms facing numerous challenges like financial losses, insurance expenses, cybersecurity risks, and limited support from employees. That’s why firms need to develop growth plan guidelines before merging to promote growth once the M&A process is complete.

You’re in good hands: We worked with M&A experts to build this step-by-step merger strategy guide to help you build a growth plan that supports both short-term and long-term growth for everyone involved. 

Step 1: Understand the Current Landscape to Build a Successful Merger Strategy

If you want to avoid the common pitfalls mentioned above, assessing both firms' strengths and weaknesses is a good place to start when building a growth-oriented merger strategy. Here are some suggestions from our M&A experts:

• Compile Critical Information: Collect in-depth details about each merging entity, including financial data, operational performance, market positioning, and human resources capabilities.
• SWOT Analysis: A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis will help you identify internal strengths and weaknesses as well as external opportunities and threats in an organized, visual manner.

You should also identify key client segments and markets to pinpoint the ones that offer the best growth opportunities and align with your strategic goals. Here are some suggestions to help you get started:

• Market Research: Well-rounded market research will ensure you understand industry trends, customer preferences, and competitors’ activities. Moreover, it allows you to identify emerging market segments and niche opportunities that can give your merged firm a competitive edge.
• Customer Segmentation: Segment your potential customers based on demographics, psychographics, buying behavior, and needs to create targeted marketing efforts and services that resonate with your audiences (remember, your customer base has more layers now post-merger and a one-size-fits-all approach will only push audiences away to competitors).

Lastly, you should evaluate the existing resources and capabilities of the combined firm’s assets, skills, and infrastructure so you can leverage strengths and address weaknesses to your full advantage:

• Financial Assessment: Before considering a merger, thoroughly assess each firm’s financial health by reviewing statements, projections, and balance sheets. Examine revenue, profitability, debt, and liquidity. Ensure the firm can handle the investment without jeopardizing short-term obligations or overall operations. If your assessment reveals negative findings, delay the merger until financial strength can be proven, potentially by gaining capital or boosting profit margins.
• Human Capital: Gauge employees' skills, expertise, and experience from both merging firms. The goal is to identify key talent and potential skill gaps you’ll have to address through training or recruitment.
• Technology Infrastructure: Determine the quality of technology systems, software, and IT infrastructure of both firms to pinpoint redundancies, compatibility issues, and opportunities for integration or upgrades.
• Operational Processes: The last step here is to analyze operational processes, workflows, and efficiency levels so you can understand if there's room for improvement and optimization. For example, you can reduce costs, boost productivity, and improve customer service by streamlining and automating everyday processes as part of your merger strategy. 

Step 2: Develop a Comprehensive Growth Plan Within Your Merger Strategy

You already know that successful mergers require thorough and strategic planning. Besides identifying synergies and aligning the merger with your overall business strategy, you must also consider resource allocation and budgeting. 

Establish a realistic budget and outline how you’ll allocate financial resources, technology, and personnel in a way that supports the merger process. Implement a communication plan after establishing a detailed timeline with all milestones, tasks, and deadlines to keep your merger strategy on schedule. This plan will keep stakeholders informed and accountable throughout the process.

You also want to ensure a smooth transition across all departments. With your human resources team, assess the merged firm’s organization chart, ensure employees are placed in suitable roles, agree on compensation, and inform employees about the new firm with a thoughtful internal communications plan. Make sure your employees find out about the merger from you first rather than hearing about it on the news.

Step 3: Leverage Technology for Growth After Combining Firms

Even though the use of generative AI in mergers stands at 16 percent, that number is expected to increase to 80 percent in the next three years. Many businesses are still unaware of how to streamline M&A efforts with technology, meaning those who start using it now will have a massive advantage over competitors that are late to the game. 

Here's how you can use technology and AI to drive growth for your professional services firm after completing a merger:

Identify Cross-Selling Opportunities

AI tools can analyze extensive datasets from accounting and legal practices to extract valuable business development insights. For example, AI algorithms can pinpoint highly probable cross-selling opportunities by gauging historical data and client behavior patterns, promoting synergies between the merging firms.

Improve Client Experiences and Retention

Did you know you can personalize client interactions and anticipate client needs with AI to support sustainable growth after a merger? This AI-powered platform enables professionals to access targeted cross-selling recommendations tailored to individual client preferences and needs. It’s easier than ever to streamline sales processes and strengthen client relationships with AI, ultimately boosting client satisfaction while maximizing firm revenue. It’s a win-win for everyone involved.

Step 4: Empower Professionals for Long-Term Success

Employees are the lifeblood of every firm, and they determine whether you can meet your objectives and remain profitable. Beyond financial KPIs, maintaining a positive workplace culture also plays a major role in a firm’s success post-merger. That's why you must set employees up for success now and in the future. Start by assessing their skills and competencies to make sure they’re in alignment with your merged firm’s goals and objectives. 

Provide Relevant Training and Development Opportunities

Equip your staff with the necessary knowledge and skills to navigate the complex environmental changes that come with every merger. You can simplify this process by leveraging AI. 

For example, your professionals can turn to business development tools that use your firm’s historical data and generative AI to predict customer needs ahead of time and provide them with unmatched experiences. Accounting and legal professionals can rely on AI to receive personalized cross-selling suggestions for every client at your firm, allowing busy employees to exceed client expectations and maximize profits.

Recognize and Reward Achievements

You can foster a positive and productive work environment by motivating your employees with recognition and rewards programs. You can also help them reach their full potential by providing them access to continuing education programs, as well as technology platforms that simplify cumbersome and time-intensive tasks. 

Step 5: Set KPIs, Monitor Progress and Adapt Your Merger Strategy As Needed

Your work doesn't stop after a merger is completed. Establish KPIs to audit your post-merger performance on an ongoing basis. These KPIs should match the merged firm’s strategic objectives and provide measurable targets to track progress.

Regular firm performance reviews and assessments are some of the most effective ways to ensure your merged firm meets expectations. Scheduled check-ins with key stakeholders are necessary to evaluate performance against established KPIs, address and anticipate challenges, and pivot the merger strategy when needed.

Remember to adapt to changing market conditions, as market dynamics can shift rapidly. Your merged firm must be agile enough to respond to changes quickly and effectively. You may occasionally have to revisit strategic priorities, reallocate resources, or explore new opportunities to achieve your firm’s growth expectations.

Next Steps

Even though merging two firms can be risky and complex, leveraging the power of technology can streamline the process for everyone involved. AI platforms like Propense.ai provide data-driven insights to firm leaders and professionals at every stage, increasing the odds of a successful merger without hindering client experiences.

Incorporating AI into your firm’s daily processes before, during, and after a merger gives you a sharp advantage over the competition. Visit Propense.ai to learn how to maximize your firm’s revenue with a continuous stream of intuitive and highly probable cross-selling recommendations for clients new and old