When it comes to growing an accounting practice, mergers and acquisitions (M&A) can be an effective strategy. However, the success of these ventures often hinges on factors that are overlooked during initial discussions. One critical area that deserves more attention is information technology (IT), particularly in terms of assessing compatibility and determining standardization across key applications.
This blog post will explore the essential IT considerations for accounting firm mergers and acquisitions and provide a comprehensive checklist to ensure a smooth integration of critical systems.
Why IT matters in accounting firm M&A
While partner compatibility and service line expansion are typically at the forefront of M&A talks, IT considerations are frequently left for later stages. This oversight can lead to costly mistakes and conflicts that could have been avoided with proper planning. By incorporating IT considerations into your accounting firm mergers and acquisitions strategy early on, you can:
- Assess true practice compatibility, including current software ecosystems.
- Identify potential licensing or upgrade pitfalls.
- Streamline the integration process.
- Ensure a unified “one firm” approach post-merger.
- Determine which applications to standardize across the merged entity.
Now, let’s look at the different categories of technology and answer:
- Why is evaluating each of these categories important?
- Which items within each category should we prioritize?
Category 1: Departmental applications
Assessing the software used across different departments is vital for ensuring operational continuity and identifying potential synergies.
By comparing applications side by side, firms can spot redundancies, compatibility issues and opportunities for consolidation. This process allows the merging entities to identify the most effective solution for the new, combined practice and helps estimate the costs and timelines for integration, which is essential for accurate budgeting and planning.
Start by listing tax preparation, workflow/project management and audit binders tools (as these can entail significant changes that an acquired practice will have to agree to), and identify:
- The number and type of licenses.
- Deployment methods per license (cloud-based, server-based, or individual workstation).
- Contract terms, especially those extending beyond one year.
Category 2: Hardware and equipment
Evaluating the existing hardware infrastructure is critical for determining the technical feasibility of integration and identifying any necessary upgrades.
This assessment helps in avoiding unexpected costs and ensures that the merged entity has the technological capacity to support its operations.
It’s also an opportunity to standardize equipment across the organization, potentially leading to cost savings and improved efficiency.
Start by listing:
- Workstations (desktops and laptops)
- Servers and network storage
- Communication equipment
- Ancillary devices (scanners, printers, etc.)
Be prepared for potential upgrades and factor these costs into your M&A planning.
Category 3: IT staffing and expertise
Understanding the IT human resources of both entities is crucial for successful integration. This evaluation helps in identifying skill gaps, redundancies and opportunities for knowledge transfer.
It’s also essential for planning the integration process itself, as the right mix of expertise will be needed to execute the merger smoothly.
Consider every member of your team, including:
- Internal IT personnel and their skills.
- External support contracts and their terms.
- Application expertise within the firms.
- Available training resources for post-merger integration.
Category 4: IT policies and procedures
Examining the IT policies and procedures of both organizations is fundamental for ensuring compliance, security and operational consistency post-merger.
This review helps in identifying potential conflicts in IT governance and creates an opportunity to establish best practices across the newly formed entity. It’s also crucial for managing risks and maintaining business continuity during the transition.
Align the following IT policies and procedures to ensure a smooth transition:
- Computer and internet usage policies.
- Remote work policies.
- Security and password protocols.
- Disaster recovery plans.
Best practices for IT integration in accounting firm M&A
The success of an M&A deal often hinges on the smooth integration of IT systems and processes.
When considering the technology component during your deal, keep these best practices in mind:
- Start early: Incorporate IT discussions into the initial stages of M&A talks.
- Be thorough: Use tools like Spiceworks or Belarc Advisor to create a comprehensive inventory of all applications and hardware.
- Set clear timelines: Aim to integrate the acquired practice within six months, with a maximum allowance of 12 months.
- Plan for training: Ensure adequate resources are available for staff training on new systems.
- Consider data conversion: If the merger is close to year-end, book data conversion services early to avoid delays.
By following those best practices and giving the categories listed above the attention they deserve, firms can significantly increase their chances of a successful merger and position themselves for future growth.
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