Accounting firm mergers and acquisitions


Merger and acquisition activity among firms has always been an important part of the accounting landscape. In recent years, it’s heated up even more. Whether your firm is acquiring, looking to be acquired, or merging with another firm, there’s a lot to know before you get started.

This page was made possible in part with assistance from Whitman Transition Advisors,
and from the Bloomberg Industry Group.

Accounting firm mergers & acquisitions

The accounting profession has been experiencing something of a crisis. As the number of accounting graduates has fallen, firms have struggled to hire new talent. On top of that, resignations have shot up along with the beginning of the Great Resignation, making the hiring of experienced professionals more difficult than ever. The nature of accounting firm work has gone through a major overhaul as well, leaving many firms scrambling to better serve their clients and remain both competitive and relevant in their markets.

As challenges mount, the already active roster of CPA firm mergers and acquisitions has heated up even more. While there could be any number of reasons for a firm to participate in an M&A activity, the most common involve the aforementioned staffing challenges, a need to add or expand services, succession concerns, geographic expansion/tapping new markets, covering more of a niche or better serving a niche, and competitive advantage. With hordes of firm principals set to retire over the next 10 years, M&A activity is already becoming even more frenzied and more competitive.

Are you considering a merger or acquisition?

We’ve already established some common reasons for considering M&A. Yours could be different, but the end questions are always the same: how do you take two firms and make them one in the least intrusive, most advantageous way, while preserving or enhancing firm culture? Are there a “best practices” when it comes to M&A activities? How can you use technology to reduce costs?

Whatever your reasons, a plan is essential. And it doesn’t matter what side of the equation you’re on; merging, acquiring or being acquired — you need a solid roadmap to help walk you through the myriad details that come along with M&A situations.

The beginning of your plan should take into consideration what makes your firm an attractive partner for a merger or acquisition. Key areas to focus on include:

  • Staff
  • Client roster
  • Billing/margins
  • Historical growth
  • Technology
  • Service philosophy
  • Culture
  • Service model

If you read that short list and feel you could come up wanting in any of these areas, then you’ll want to work actively to prepare your firm for a successful venture. All of them fall roughly under these headings, which we’ll consider separately: Employees and culture, clients, services, technology, and finances.

What are the main tax implications of
mergers and acquisitions?**

A merger or acquisition may be a tax-free IRC §368 reorganization or a taxable transaction under the principles of IRC §1001. There may also be state tax consequences from some types of M&A transactions.

The potential tax consequences of a merger or acquisition to a business entity and its owners – and the complexity of the tax principles involved – dictate that one of the most critical aspects of structuring such a transaction is corporate tax planning.

The tax department provides a strategic analysis that informs and guides M&A decisions and structuring. This includes reviewing the following through the lens of tax liability and the impact on the cash flow and value of the merged business:

  • Structuring
  • Due diligence
  • Compliance
  • Data retention
  • Integration of systems and departments
  • Legal entities
  • Accounting methods
  • International employment services
  • Cross-licensing arrangements
  • Transaction-cost recovery

Federal tax treatment of a merger or acquisition

As defined in I.R.C. §368, a corporate reorganization is a term of art used for federal income tax purposes and encompasses various types of corporate transactions, including:

  • Acquisitions of assets or stock of one corporation by another
  • Readjustments of capital structure of a single corporation
  • The division of a single corporation into two or more entities

A reorganization must meet several statutory and common law requirements for the participating corporations and their shareholders to avail themselves of favorable tax treatment.

How much tax is paid when a company is acquired?

An acquired corporation recognizes no gain or loss upon an exchange pursuant to a plan of reorganization if it receives solely stock, securities, or both in a corporation that is a party to the reorganization – and the acquired corporation distributes such stock, securities, or both to its shareholders.

If an acquired corporation receives other property (boot) in the reorganization, it recognizes gain to the extent of the boot if the boot is not distributed to shareholders of the acquired corporation.

The acquired corporation generally recognizes no gain or loss on the distribution of stock, stock rights, or obligations of another corporation that is a party to the reorganization, if the acquired corporation received the distributed property in the reorganization.

In general, an acquiring corporation recognizes no gain or loss upon the issuance of its stock in exchange for the property of an acquired corporation.

The assumption of the liability of an acquired corporation is generally not treated as the payment of cash and no gain is recognized.

What is the tax basis in an acquisition?

The basis of an acquired corporation’s assets carries over to the acquiring corporation increased by any gain recognized by the acquired corporation’s shareholders.


**Reproduced with permission. Published 1.11.24. Copyright 2024 by Bloomberg Industry Group, Inc. (800-372-1033)


Employees and culture

You don’t need anyone to explain the importance of employees to you. Anything that happens for a firm is a direct result of its staff and their abilities. Similarly, however, almost anything that doesn’t happen for a firm is a direct result either of a lack of staff or the abilities of a current staff.

In a merger or acquisition, a firm’s staff can be one of the leading reasons for the activity. So making sure yours is in the best shape it can be in is key to a smooth deal.



The right employee mix

There is no one definition for what the “right” employee mix is. Start by asking some probing questions that can help you uncover answers. Be as objective as possible when answering:

  • Where is your capacity most strained?

  • What employee areas drive the greatest revenue?

  • Do clients frequently request services you can’t provide?

  • Do any employees get frequent compliments? Complaints?

  • Is anything being left undone or constantly pushed back?

  • Do you struggle when certain employees go out on vacation or sick leave?

  • Is each of your employees an important part of what happens? Do you have a select number of “rainmakers” around whom everything revolves? 

  • What areas do you have the hardest time hiring for, and how well-set is your firm for those employees now?

  • Are there any service areas you want to cover, but can’t because you lack expertise?

After answering these, ask yourself if a partner firm would find those answers encouraging, or discouraging. If the answer is “discouraging,” then you have some work to do on your employee mix. The two main routes you can travel to improve your mix are hiring and training. Neither is inexpensive, but in the end, it’s better to train current employees in new tasks, software, or abilities than to hire new employees only to turn around and subject them to a merger or acquisition.

Adjusting your staff (hiring and firing)

Priority one is having a full staff, whatever that means for your practice. While lower-level, unskilled employees will typically come and go without much consequence for your operations, your skilled staff are harder to find, especially if they’re experienced as well.

But there’s another side to the coin — employees who aren’t pulling their weight, are under-delivering, or who breed discontent or drama in your ranks. When it comes time for a merger or acquisition, these employees could become a liability in due diligence and should be replaced if possible. In some extreme cases, you might even be better off firing them without a replacement than keeping them on and allowing them to continue damaging your prospects.

Laws on separating from employees vary from state to state, so be certain you understand yours before proceeding. And in the era of Glassdoor and similar employer review sites, you want to keep in mind what an employee might say about their experience with you after being fired. A little generosity could go a long way.


Assess your staff’s output

What is the actual volume of work your staff churns out on a weekly/monthly/quarterly/annual basis? Many firm principals can’t answer this question off the tops of their heads, and it’s a critical one. When you’re in negotiations with a savvy partner, standalone statistics like billing, margins or revenue are only part of the story. Productivity is how you achieved those numbers — and it can be pretty low while still generating significant revenue, for example, if you have enough employees.


Similarly, if you have a small staff and are churning out incredible numbers, that suggests high productivity, which will be extremely attractive to a partner. Understand not just your metrics, but how they’re generated and what influences them.


Identify your stars and rainmakers

Every firm has employees the principal(s) consider crucial to their success. These can be separate from the employees who drive disproportionate chunks of the firm’s revenue. Both will be aces up your sleeve in a merger or acquisition, but you’ll need to be able to provide some assurances that they won’t go anywhere for a while.

We’ll go more into when you should announce potential M&A activity to your staff, but your stars and rainmakers should likely know before everyone else does. You might consider putting them under an NDA, and having a conversation to see how they feel about the concept. Some might need inducements to stick around if you proceed — consider whether you want to take this on yourself, or work with your partner to offer what these critical employees demand to stick around. Remember to weigh any demands they might have against your end goal in the merger or acquisition. Oftentimes, a salary bump or extra vacation are well-worth achieving the bigger picture.



Your firm’s culture might be similar to others, but it’s highly unlikely that it’s identical. The dynamic among different groups of people has an enormous effect on culture, expectations, and productivity. The compatibility of two cultures depends on many factors, but chief among them are:

  • Diversity

  • Vision

  • Values

  • Leadership

  • Workflow/operations

  • Autonomy

  • Hierarchy

  • Work/life balance

If your firm is markedly different in any of these areas from a prospective merger or acquisition partner, there’s potential for complications. Plan to preemptively mitigate these issues working with your partner to arrive at a suitable compromise when needed.


Notifying your staff of a merger or acquisition

As with any major shift in the work environment, the sooner you can inform your staff, the better. But there are some major considerations.

  • Non-disclosure agreements: Has your firm agreed not to talk about the activity until a certain time or date? Is your staff exempted from this?

  • How far along you are in negotiations: tell your staff too soon, and you could be fielding questions and concerns over something that’s not going to happen. Tell them too late, and you risk not preparing them adequately. 

  • Anticipate as many potential questions as possible: Don’t make the announcement and plan to walk away. Employees will expect to understand how the change will affect them, their jobs and the day-to-day business. You won’t have an immediate answer for absolutely everything, but the more answers you have, the more you can address anxiety.

  • Does the change involve shuffling or laying off staff: It’s best not to inform your staff that there are going to be reassignments or layoffs until you know what those are. Nothing makes staff run for the job boards faster than not knowing if their positions are safe. Have a plan in place for announcing the change and immediately informing those whose employment will be affected.

This is the part of any merger or acquisition that will always be totally unpredictable. The best advice you can get here is to expect the unexpected, and plan, plan, plan. The more possibilities you’ve prepared for, the more your staff will feel reassured that you’re in control and working in their best interests alongside those of the company.



Your current and prospective clients are obviously one of the greatest assets to a potential partner in a merger or acquisition. Does your client list complement your partner’s, or is it a different audience? What’s the average tenure of your clients? What are they saying about you on review boards? Understanding and being able to describe your client base will serve you well in any M&A activity. And when it comes time to negotiate, you’ll want to be able to get into some details.



Identify your star clients

This sounds simpler than it is. More than likely you read this and immediately thought about your highest billing clients. And while those clients are indeed important to your bottom line, there are other things that go into making a star client.

  • Reliability

    Does the client pay bills on time, provide everything you need to work, and come to you proactively with questions, issues or problems? Do they respond quickly to questions, and are they always available when needed for clarification or discussion? Do they keep unnecessary requests to a minimum, and do they readily agree to pay when asking for out-of-scope work?

  • Potential

    If your client is growing rapidly or shows the possibility to do so, then they are ripe for advisory services and additional services as they grow. The upside these kinds of clients offer down the road makes them an important part of growing your own portfolio.

  • Niche representation

    You might have a client who isn’t especially valuable, or who causes some headaches for your firm, but is a plum client to have in order to attract others of their industry or type. Consider how having a heavy-hitter in a particular industry on your roster might make them a valuable asset beyond the revenue they generate.

  • Tenure

    How long a client has been with you isn’t by itself enough of a reason to mark them as a star. However, it’s worth considering that long-term clients have a big effect on your average relationship length, which could be a factor your M&A partner considers.


Firing problematic clients

It’s never fun to anticipate ending ties with a client, but when anticipating a merger or acquisition, cutting out problematic clients is essential. Anything weighing on your client roster can complicate your plans.

Think about your client roster and how you’d ideally want it to appear. You might find a small number who aren’t an ideal fit for your firm for reasons other than the obvious — perhaps they aren’t part of a niche you want to serve, or don’t represent the level of minimum revenue you want clients to generate.

Then there are the obvious reasons: demanding clients who don’t seem to respect the partnership by asking for freebies, not paying on time, beating up your staff or constantly pestering you for minor items they could be doing themselves.

Shedding a few clients in anticipation of M&A activity is a good practice, but don’t get carried away. Evaluate your pool of potential cuts one by one, and ask if it’s possible to get things turned around. There could be some clients who aren’t ideal because they haven’t been targeted for development by your staff. These could be valuable clients in the future who just need a little love. So cut carefully.


Assessing client fit both pre- and post-M&A

It’s never a simple matter to decide if a client is a fit for your firm. But there are some objective standards you can use to prequalify them in a way that eases the process.

  • What services do they need?

    You don’t want to get caught up in trying to be all things to all clients. If you have core services you offer or are looking to offer post M or A, clients who need those services are clearly first in line for consideration. While you likely offer services outside of your core, those should mostly be for existing clients who are also customers of your core services. Adding or keeping clients for peripheral services is best when they can be developed into a core client.

  • What kind of revenue do they generate? Is it likely to grow?

    Existing clients who bring in big revenues in most cases are easily identified as keepers. But don’t ignore smaller clients who exhibit good growth or growth potential. Steady payers and clients who are reliably easy to serve for the revenue they generate are also good keepers. Consider whether clients who consistently fail to pay on time, cause your firm undue work and drive down hourly revenue, or who seem to have stagnated or are shrinking should be retained.

  • What does your firm need to do to appropriately serve the client?

    This comes back to your core services, but it also takes the breadth of work into consideration. Do you have the capacity to attend to their needs, even when the services they need square with your offerings? Will they need lots of personal attention and hand-holding? Is their own operating structure well-defined enough that you have a clear idea of who your firm will be working with regularly?


When to inform your clients of a merger or acquisition

Client retention post-merger or acquisition is a primary concern for both parties.

Services & Niches



Your firm’s service offerings are likely to have some overlap with a merger or acquisition partner. Normally, this will either be synergistic or complementary. It’s good if the overlap adds needed capacity, expertise or skill to the service area. 

The ideal fit for a merger or acquisition complements your services by adding capacity, bringing needed expertise or skills, adding niches you didn’t have before, introducing new service lines and revenue streams, and attracting more and better clients with more comprehensive or better-defined services. An increase in breadth and depth of talent, niches, and services is of course ideal.



The merger or acquisition should offer attractive gains in efficiency for both parties. In the service realm, that means the obvious: cost reduction and/or a more streamlined, efficient process. Service efficiency gains can be found when one or both parties bring clear process roadmaps, significant technology that automates tasks, or staff with deep experience that makes them more ready to tend to a specific service area.

Because the hiring market isn’t always cooperative, it’s good to automate anything you can reasonably automate. Bookkeeping services, for example, can be offloaded to technology like Botkeeper, reducing your firm’s reliance on bookkeepers and allowing your staff to focus on more of the services clients need. That also gives you an advantage in hiring, as you can concentrate your efforts on the higher-level, skilled employees you need.


Cost savings

As mentioned earlier, a merger or acquisition can present an opportunity for cost savings, which should include some or all of the following:

  • Professional Liability Insurance (PLI)

  • Software licenses

  • Administrative redundancies

  • Occupancy

If you’re adding technology that reduces reliance on staff or frees them up for higher-margin services, you’re realizing cost savings.

As you complement or add services via a merger or acquisition, you’ll want a clear idea of what your costs look like going in, so that you can identify ways to appreciate some savings in your services. There are many ways to accomplish this:

  • Standardizing processes involved in performing a service so it’s done consistently and can be optimized for time savings.

  • Adding technology like Botkeeper that largely removes staff from the mix

  • Hiring specialized staff

  • Prioritizing core services



It goes without saying: you want the most experienced and skilled staff you can get your hands on. In a merger or acquisition, make sure you’re getting the bench depth that will allow you to confidently tackle client service without compromises.

Be wary of partners with core service areas that are struggling, unless your department fills that hole. Two partners both lacking the same service area expertise will have enormous trouble finding success as one unit. Don't make it 1 + 1=1.8. Make it 1 + 1=WOW!


Modern notebook computer with future technology media symbols-1


The tech stack

In today’s market, firms have flat run out of excuses not to be taking advantage of technology. There is such a wide array of solutions in a spectrum of price points, that there is practically no use case your firm can point to and suggest it’s either irrelevant or too expensive (unless of course it’s automating work you don’t do).

This does not, of course, mean that firms should just use technology without regard for good sense. But your tech stack, its components, interoperability, cost, benefits, usability and maintenance are critical to firm operations. If your stack is badly out of date, unusable, costing more than it’s delivering or—even worse—is practically non-existent, this will raise a big red flag for any potential merger or acquisition partner.

Technology is always an investment of money, but more importantly it’s an investment of time — and no acquiring party or merging partner wants to start off a venture by spending months or longer bringing the other entity into the 21st century. While this won’t always be a deal-breaker, it will absolutely sap enthusiasm for the deal and start things off in a less harmonious place — not how you want firm life to be post-M or -A.


Technology compatibility

An oft-overlooked factor is whether two firms looking at joining have compatible technology. In most cases, there will be at least some overlap, but probably a LOT of mismatches. In these cases, there are some major conversations to be had:

  • Does the joined entity choose between the currently used analogous technologies, or start fresh with something new?

  • How will data from the abandoned system(s) be migrated?

  • What team(s) or individual(s) should be responsible for data migration and integration?

  • How long will data migration take?

  • If clients are affected by tech migration, how should they be informed, and by whom?

Implementing an acquisition or merger should account for the time needed to join the various pieces of each entity, and technology is one of the main considerations. The last thing you want is to have to devolve into a manual solution while getting something new up to speed. So planning your tech is essential.


Ask what can be automated

To squeeze every drop of efficiency and value out of your firm and staff, you should automate as much as you can reasonably automate. Save your staff and their valuable time for the things only a trained, professional human can do, and leave the rest to accounting automation such as bookkeeping software.

Even if you enter into an agreement for a merger or acquisition and your partner doesn’t automate all the same tasks you do, you can benefit from the fact that additional staff won’t be required to keep client accounts running smoothly while everything integrates.



If you haven’t been paying close attention to the security of your firm’s data, you’re going to find yourself in at least an awkward — if not horribly uncomfortable — position any day now.

Getting serious about cybersecurity is a must. While most automated solutions like Botkeeper offer robust encryption and security protocols, ultimately your firm is liable for the information it keeps on its own servers (whether local or in the cloud). One small breach could cost you hundreds of thousands, if not millions of dollars.

This isn’t simply about buying and using good cybersecurity technology, it’s also about establishing best practices with your staff, and removing as many individual decisions about security from the loop as possible. You'll want your partner firm to have a similar outlook.

If necessary, have an IT professional come in and review your firm’s security practices and safeguards and issue recommendations. A breach is hard to shake off, and the stink of it is not something any partner will have an easy time overcoming.


Training and implementation

Few things hurt worse than spending good money on technology that goes unused. If your tech stack is impressive, but no one knows how to use it, a merger or acquisition partner will be saddled with getting your staff up-to-date on your technology.

Nearly every technology partner offers training and implementation as part of their services. There’s a good chance you can access self-guided training modules for free, or you can take advantage of vendor training when available (and if it fits your budget—sometimes this is free). Another option, if you have someone on the staff who is well-trained, is to have internal training.