Hayes Knight had done mergers before but nothing this big. Yet Interlandi soon concluded the two firms were a good fit. The ‘meet and greet’ with CDB went well. Clements and the Hayes Knight team led by Dal Bosco quickly established a rapport. The numbers checked out, too.
All that made for a fast deal. Due diligence was completed and contracts written within a couple of months. On 7 January 2013, a new $10 million firm emerged, and the Hayes Knight Melbourne workforce increased overnight from 42 to 65.
[breakoutbox][breakoutbox_title]Building a new family[/breakoutbox_title][breakoutbox_excerpt]The real merger work begins after the documents are signed.[/breakoutbox_excerpt][breakoutbox_content]
The real merger work begins after the documents are signed. Integrating two firms with different systems, processes and organisational structures and bringing their cultures together is like bringing together two families for the first time. Many small and medium accounting firms looking to acquire scale by expanding have discovered that a badly handled merger, or even one that succeeds messily, can shatter staff morale and productivity and leave everyone wondering where the new organisation is heading.
The Hayes Knight team threw a cocktail party and a barbecue and held group training sessions. Paul Dal Bosco says the firm even used seating to integrate the new staff.
“One of the things that was done was to ensure every CDB person was sitting next to a Hayes Knight person rather than everyone forming their own little clique. We did that to get different ideas and get people talking.”
Indeed, they say it’s been so successful that all staff now go out for lunch every Friday. Former CDB staff members now regard themselves as part of Hayes Knight. Still, the firm expects it will take another 12 months to complete the integration. As Dal Bosco says, negotiating the merger itself was probably the easy part.
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Scale, services and synergy
The strategic fit between the two became even more obvious after the deal. As soon as Paul Clements entered Hayes Knight, he saw the “pent-up demand” for financial planning from the firm’s clients. Paul Dal Bosco describes CDB’s financial planning business as a bonus, rather than the merger’s driver, but agrees that “it became an advantageous fit, rather than us having to go and build it from nothing”.
The merger also delivered both firms much-needed scale. “You need the ability to keep training your staff and keep attracting good staff,” notes Interlandi. “You need to continually add on and grow your critical mass. You still need to supply all the audit services and all the tax services. To do that on a smaller scale is very expensive and time consuming. Having more partners around with good staff just makes that task easier.”
CDB clients, of course, also gained a broader range of services – more tax solutions, for example, and a deeper audit team. And CDB’s arrival also helped to expand Hayes Knight Melbourne’s corporate advisory business.
But the real gain, says Interlandi, came from operating synergies between the businesses, something many merger teams strive for but few actually find. “There was a lot of duplication in the fixed costs … IT benefits and admin benefits. They were the real wins for the practice.”
The remuneration and equity arrangements of the merger were done in such a way that all the partners benefited financially. “There was a small increment from the merger,” says Interlandi. “Broadly, all of us gained something from the merger, so we increased our takings.”
Interlandi says the key to any successful merger of accounting firms is cultural fit, rapport and establishing systems that ensure clients get a consistent service.
Miss out on any of those and the merger will fail.
“It’s hard work. Nobody can say it’s easy integrating any business,’’ he says. “It needs to be done carefully.”
As the firm grows and expands its client base, it will have to keep building scale. That, according to Interlandi, probably means more mergers. “As long as there is value for our clients, we’ll do it. I think it’s more likely than not that there will be others.”
