Key points:

• • • Granular data and MAD data factories 鈥� Granular data lineage, integration outcomes, and decision traceability are critical for auditability, investor demands, and regulatory oversight 鈥� and MAD data factories could be a solution to these challenges.

    • Problems with traditional virtual data rooms 鈥� Traditional virtual data rooms, while an improvement over previous methods, are now considered outdated, lacking the advanced data capabilities needed for modern MAD processes.

    • Evolution of MAD processes 鈥� The shift from traditional MAD processes to data-driven, AI-powered approaches underscores the importance of modularity, compartmentalization, and creating reusable building blocks to adapt to competition, customers, and regulatory changes.

In an all-too-often reoccurring story, the merger deal was identified, architected, and solid. The deal checked all the boxes 鈥� valuation, cultural fit, synergies, and even innovation enrichment. Between the announcement and close, however, granular data reviews revealed a material, long-buried litigation risk that was missed in the due diligence mainly because of siloed, conflicting data from previous mergers and acquisitions.

The ensuing fire drill was too common 鈥� weeks of delay, additional costs, investor angst, and damaged trust across organizations. Unfortunately, this is not an isolated case study. The operational and decision support data buried within organizations often can represent material legal, compliance, and audit risks.

With corporate, industry, and governmental data now measured in zettabytes (that is, a 10²¹-multiplier compared to a terabyte at 10¹²), traditional data analysis methods are inadequate for today鈥檚 corporate technology environments, and even worse for exploding data-driven AI capabilities.

When combined with fragmented corporate and industry data infrastructures, cyber and IT security challenges, technological advancements, and application-centric solutions, the M&A legal, compliance, audit, and operational experts of today are unprepared for the bevy of red flags now on the horizon.

The rise of MAD data factories

For the last 15 years across mergers, acquisitions, and divestures (MAD), the use of virtual data rooms has been a cornerstone of due diligence and secure document sharing. This legacy usage had improved the deal pipelines, focused legal and compliance risks, and shortened post-deal integration playbooks across private equity and corporate acquisitions, and even for MAD brokers and advisors.

When introduced, virtual data rooms represented a quantum shift of how MAD data was identified, reviewed, and compiled, eliminating the demand for so-called sensitive compartmented information rooms within legal and corporate facilities. It was a significant burden to assemble, validate, analyze, and track document-based artifacts, which created additional risks, expenses, and security challenges. Virtual data rooms were a better method, but still not ideal.

Today, traditional virtual data rooms represent the past 鈥� analogous to paper-based digitization common across application systems. Why? Technological data advancements are offering MAD insights and integration capabilities previously considered too expensive, too laborious, and too disrupting.

Virtual data rooms represented large blobs of data content, but what about all the granular data lineage, integration outcomes, and decision traceability needed for auditability, investor demands, and regulatory oversight? Today, the challenges of original virtual data rooms design principles when combined with advanced data technologies can deliver a robust, adaptable approach for MAD pre- and post-deal teams 鈥� MAD data factories.

To understand the fundamental shifts, Table 1 compares and contrasts the differences of principles and designs across nine MAD playbook categories.

The comparisons also highlight the next-generation outcomes sought with the inclusion of advanced data capabilities (that is, the fuel) and AI solutions (the powerful engines). For legal, audit, and regulatory personnel, they can no longer just check boxes 鈥� they must be continuously and proactively addressing deal accountability, risk intelligence, and anticipating ever-changing outcomes.

How a MAD data factory works

Straightforwardly, the MAD data factory represents the significant evolution of traditional virtual data room designs with the incorporation of repeatable data-driven AI capabilities, which analyze and predict outcomes, risks, and deficiencies.

This MAD automated assembly-line architecture turns messy operational systems and document artifacts into smart, adaptable decisions using natural language processing and advanced data solutions, such as data meshes, fabrics, and weaves. An analogy would be a 1970s-era auto factory compared to a 2025 gigafactory.

From pattern recognition to smart data rooms, document summarization, and operation data, the MAD data factory represents highly specialized domain knowledge weaved into advanced leadership conversations. It is the data necessary to support leaders who command the goals, synergies, budgets, and designs delivering MAD strategy and outcomes.

Table 2 showcases the underlying mindset shifts underway with the explosion of data complexity and new technologies, coupled with the MAD impacts on deal identification, integration, and value realization.

Table 2 also demonstrates that MAD actions throughout the remainder of this decade are no longer transactions, but highly complex and continually changing connections even after the deal is announced. MAD discovery used to be about document sharing, resulting in reactive outcomes based on highly selective information, such as was found in traditional virtual data rooms. The problem with prior MAD playbooks and checklists, often based on months-old data, is that they don鈥檛 provide in-depth real-time analysis, interpretation, or an ability to connect the dots within artifacts, deal teams, or across the combined entities.

The eruption of AI 鈥� through generative AI, retrieval-augmented generation (RAG), agentic AI, and agentic RAG 鈥� combined with an equal explosion of data storage and design solutions (that is, the fuel feeding individual AI solutions) has broken the traditional methods and approaches that were prized by boards of directors, C-Suite executives, and their advisory firms. Instead, what is emerging at the edges of data-driven AI capabilities and benefits for private equity, corporate acquirers, and MAD system integrators are the importance of data fragments that need to be encapsulated into the pre- and post-deal events.

MAD today is about modularity, compartmentalization, and creating reusable Lego-like building blocks that can be innovatively improved or delivered to expand scale and market penetration. These architected Legos can then be stacked, using advanced technology and data architectures, to rapidly adapt to competition, customers, regulators, and even reshoring of manufacturing capabilities.

The principles for MAD are now focused on delivering a seamless pipeline from the target to the final integrations, all driven by solutions within the emerging MAD data factory designs. Using these factories, MAD leaders are able to deliver continuity even during changes. Indeed, modern MAD processes are not one-offs but rather flow-based, interoperable, and governed. Each step is stackable, auditable, and reportable that supports accountability and MAD value delivery.

Since 2022, before a 45% to 55% contraction of annual deal volumes, the pre- and post-deal playbooks were about legal checklists, long-tail revenue targets, brute-force operational integrations, and robust program management against pre-deal synergies. Yet, the reality of MAD is that it is 鈥� it is about data science.

Past to present

For the remainder of this decade, MAD is about data, intelligence, prediction, traceability, auditability, modeling, and adaptability all leveraging the playbook pillars of the past. As a result, each phase of the MAD process 鈥� from red flags to real time 鈥� is auditable and reportable, possesses lineage, and is backed by evidence.

How many organizations and leaders are preparing for the future MAD explosions using legacy ideals, skill sets, and methods? Experience does matter, but only if it uses the MAD data factories to create outcome certainty, deliver new revenue streams, instill regulatory consistency (not just compliance), and offer a model for speed and automation. In fact, I discussed the growing realities of M&A digital demands using AI back in 2021. At that time, the technology was embryonic, the MAD data principles long tailed, and the imperatives unproven. That was then.

Now, the mainstreaming of MAD data factories has arrived 鈥� all the pieces are there for assembly. The MAD roadmaps are available, but the map readers are scarce. And MAD will never be traditional or transactional again.

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Key points:

• • • Preparation is key for mergers聽鈥� Successful tax, audit & accounting firm mergers require years of preparation, focusing on improving the firm’s culture, leadership, and long-term strategy.

    • Importance of culture聽鈥� The alignment of goals, values, and culture between merging firms is crucial, because cultural clashes are often the main reason why mergers fail.

    • Desirable characteristics in merger targets聽鈥� Firms that are attractive merger targets typically have strong leadership, organic growth, profitability, partner alignment, and a scalable practice.

Selling your tax, audit & accounting firm isn鈥檛 unlike preparing your house for sale, says industry consultant Matt Rampe, partner at Rosenberg Associates. You want the firm looking its best, just in this case 鈥� and that often means raising rates, pruning unprofitable clients, improving margins, and lining up future partners.

These steps can take years, not months. 鈥淎lways be ready for a sale, even if you’re not planning to sell,鈥� Rampe says. 鈥淚t takes time, and it takes planning.鈥�

While firms shouldn鈥檛 jump at the first buyer, the best offers go to those that are best prepared to receive them.

Mergers keep gaining steam

Often, by the time a tax, audit & accounting firm gets to the level of $20 million to $30 million in annual revenue, organic growth usually isn鈥檛 enough for firms to rapidly expand. To scale, many may look to merge with smaller firms.

Allan Koltin, CEO of Koltin Consulting Group and a top advisor on M&A in the tax profession, says that deal-making has not slowed down 鈥� he was busier in the first quarter of this year than ever before. Indeed, history has shown the larger tax, audit & accounting firms are continuing to get bigger, he adds.

In 2000, the 100th largest firm reported $6.5 million in revenue. By 2024, that number had jumped to $53.2 million, according to Accounting Today. In fact, half the Top 300 tax, audit & accounting firms have merged with others over the last decade.

The marriage checklist: What buyers want

With mergers continuing unabated, Koltin has developed what he calls a marriage checklist of desirable characteristics in a merger target, including great leadership, strong organic growth, profitability, partner alignment, great culture, and a scalable practice.

Further, it鈥檚 important for the target firm to be in need of capital for expansion, making its leadership more open to a potential deal. Target firms should also have successful track record making M&A deals, significant next-generation talent, and 鈥� of course 鈥� be respected and admired within the profession.

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Rosenberg Associates鈥� Rampe further emphasizes the importance of geography, explaining that buyers often look for complementary regions or cities. He also notes that firms with strong, profitable niches are more attractive. 鈥淎s private equity continues to come into the market, it becomes more and more important to find the thing that you are number one at,鈥� Rampe says. 鈥淎nd I think specialization can help you get there quickly.鈥�

Yet, while private equity buyers continue to scan the tax, audit & accounting field for potential targets, some firms are standing pat while others are patiently searching for the best deal possible.

Finding 鈥渢he right fit鈥�

Less than three years ago, Woodmere, Ohio-based HW&Co., a $24-million accounting and advisory firm with 14 partners and more than 140 employees, didn鈥檛 change itself to attract a buyer. Instead, it followed a 10-year strategic plan launched in 2019 that pushed it to expand beyond Ohio, grow its healthcare niche nationally, and build career pathways for its younger professionals.

Yet, it was that clarity of purpose that made it an appealing merger partner for Citrin Cooperman, a private equity-funded, top 20 professional services powerhouse. It is Citrin Cooperman鈥檚 first merger since private equity giant Blackstone acquired a majority stake in the firm in January, buying its stake from New Mountain Capital, which invested in Citrin Cooperman in 2022. The deal between Citrin Coopermand and HW&Co. .

鈥淚f we had to flip a switch to be different than who we are today, then that wasn’t going to be a success,鈥� says former HW&Co. president and CEO Brandon Miller, now managing partner of Citrin Cooperman鈥檚 Ohio offices.

Scott MacChesney, Citrin Cooperman鈥檚 vice president of integration and administration, says his firm looks for others that have 鈥済reat cultures鈥� and 鈥済reat growth stories.鈥� HW&Co., which merged with three firms over the last four years, had a strong presence in Ohio, a region in which Citrin Cooperman wanted to grow its presence. A similar, middle-market client base was another attraction. 鈥淭here are a lot of different factors obviously, but I think that consistently the most important one is that it’s a right fit,鈥� MacChesney explains.

Miller agrees. 鈥淎ll the people in the entity really care about each other,鈥� he says. 鈥淭hey care about developing people, they care about teamwork, they care about collaboration, they care about growth, and you just don’t see that in other firms that are out there 鈥� and I’ve met with a lot of them.鈥�

The top consideration

When deals fail, however, it鈥檚 usually clashing cultures that are to blame. A of almost 1,100 M&A leaders showed that 44% cited a lack of cultural fit and friction between the acquiring and target companies as the top reasons that integrations fail. 鈥淢any M&A executives have admitted to us that they gave culture too little attention, too late,鈥� the survey stated.

Rampe concurs. 鈥淥ne of the most important factors that predicts success is probably alignment 鈥� alignment of goals, values, personalities, technology, client mix,鈥� he notes. 鈥淚f I take two successful companies and then mash them together, but they’re really running on very different strategies or cultures, it’s not going to work.鈥�

Koltin sums it up: 鈥淎t the end of the day, culture defines it. Culture is how hard do we want to work, culture is how we treat our people, culture is how we treat our clients. Are we basic compliance providers, or are we the clients鈥� most valuable advisor? All those things are in play.鈥�

You can find out more about how private equity is impacting the tax, audit & accounting industry here

Indeed, so robust was this growth that the 成人VR视频鈥� Law Firm Financial Index (LFFI) score rose 4 points in Q3 to an impressive score of 71 鈥� the second-highest score of all time. As 2024 comes to an end, law firms are continuously experiencing significant growth, approaching near-record levels. In fact, with seven straight quarters of improvement, firms have not only achieved one of their highest historical scores but also appear to be fundamentally stronger than at any other time in recent years.

Demand in the legal industry performed exceptionally well, rising 3.6% in Q3. Worked rate growth also continued accelerating at a similar pace to the previous two quarters. Moreover, if we set aside artificially inflated growth for fees worked in Q2 2021 caused by the outbreak of the pandemic in the previous year, fees worked exhibited its fastest expansion historically this quarter.

Additionally, an increase in productivity was partly driven by the previously mentioned surge in demand, but another contributing factor was the restrained level of hiring by many law firms. Although they continued to expand their workforce, many firms did it at a more conservative rate than in recent years. Ultimately, the industry’s strength is clearly demonstrated by stable but managed expenses and solidifying growth, with revenue reaching record highs and accelerating rapidly, despite minimal contribution from one of the most lucrative practice areas, M&A.

While much of the third quarter’s vigor came from a resurgence in legal demand and counter-cyclical practices remained the major source of this growth, transactional demand also surprised many with a robust performance. M&A, probably the transactional practice that has struggled the most in recent years, continued to fight its way back to prominence 鈥� a trend that many are eagerly monitoring and are hoping will persist well into 2025.

State of M&A so far in 2024

For the first nine months of 2024, M&A volume rose by 18.8% year-over-year, reaching $2.5 trillion USD, with each quarter in 2024 surpassing its corresponding quarter in 2023, according to a that examined global M&A performance. The M&A landscape appears more resilient, as the number of megadeals valued at $10 billion USD or more increased 24% in the first nine months of 2024 compared to the previous year. However, the overall number of deals decreased slightly, down 4% year-over-year.

From a regional perspective, Dealogic’s report highlights that North America experienced a notable resurgence in M&A activity during the first nine months of 2024, after a couple of unenergetic years. And even though there was a 3% decrease year-over-year in volume during Q3, M&A value exceeded $1.23 trillion USD for the first nine months, reflecting a 20% increase over the same period last year.

With this context in mind and reflecting on our previous Q2 demand estimates by segment, it suggests that even if our growth figures could鈥檝e appeared less optimistic compared to other sources 鈥� likely due to sampling differences and limitations 鈥� 聽analyzing the broader business and corporate environment can help us understand that the transactional landscape is becoming increasingly favorable for many, especially those law firms whose main source of growth is driven by this macro-practice group.

Is an M&A comeback on the horizon?

Overall M&A activity has experienced some challenges in recent years, mainly because of a slow economy coupled with high inflation, geopolitical uncertainty, and business skepticism. In 2022, the average law firm suffered a 10.2% contraction in M&A demand hours, with Am Law Second Hundred firms suffering the greatest hit. While 2023 continued to be a hard year in terms of M&A work, most segments started to move in the right direction, except for Am Law 1-50 firms.

However, the trend has continued to improve so far into 2024 and is showing no signs of weakening, with Am Law Second Hundred and Midsize year-to-date growth now sitting in positive territory after almost three years.

M&A activity is only expected to keep climbing because the needs and desires of corporate leaders to transform their businesses 鈥� due primarily to the impact of AI and to accelerate their growth in a sluggish economy 鈥� are creating more and more opportunities for M&A, according to . The IMAA argues that due to accumulated constrained M&A activity the pressures from both the demand and supply sides continue to rise, making a major comeback in M&A dealmaking inevitable. And it鈥檚 not a matter of if, the IMAA states, it鈥檚 a matter of when.

Indeed, the broader economic landscape might start to clear up in the coming months as well, potentially setting the stage for an upward trajectory for M&A deals in terms of both value and volume. And further expected interest rate cuts from central banks in North America and Europe could lead to greater economic activity. Additionally, the results of the US election may provide more clarity for investors regarding anticipated policy and regulatory changes, as well as sector impacts.

While uncertainty may continue to loom for some time, with the LFFI reflecting an increase in law firm hours, deal values rising, becoming more positive, and economic factors continuing to trend in the right direction, a resurgence may occur sooner rather than later. Therefore, law firms should remain vigilant and be prepared to fully capitalize on these opportunities.

You can download a full copy of the 成人VR视频庐 Institute Law Firm Financial Index report for the third quarter of 2024 here.

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Investment in WA mining has been strong for many years, with more than $9 billion invested in mining and processing operations since the middle of the past decade. But there are signs that the pace of investment and development may be quickening.

Public stock offerings show focus on a green future

Recently, a number of metals and mining initial public offering (IPO) prospectuses have been circulating in Australia that promote their local companies鈥� capital raisings by linking them in some way to the reduction in the carbon footprint and emissions, according to 成人VR视频 research.

Fifty-five IPOs were announced for admission to the Australian Stock Exchange (ASX) in the first six months of this year. Of these, 41 IPOs were among the Metals & Mining global industry classification standard 鈥揳 surprisingly large majority. What鈥檚 more, all but one prospectus listed 鈥渆xploration鈥� as the company鈥檚 primary focus, highlighting the demand being generated by growing global demand for the types of resources produced by the WA mines.

To further strengthen the tie to green energy, 21 of 41 prospectuses mention, either directly or indirectly, a link between the metals and minerals for which they鈥檙e exploring and a transition to clean energy and net-zero emissions. For example, Koba Resources Ltd. offered an extensive two-page letter with details on the cobalt industry, consumption forecasts, and its use in batteries including in electric vehicles, all while referring to the Biden administration鈥檚 Clean Energy Plan.

Summit Minerals Ltd. states it is 鈥渆xploring for battery minerals,鈥� suggesting that it, too, is linked to the energy transition.

Other offerings were less specific but still contained indications of the purpose of their exploration, such as two companies that referred to energy transition less explicitly within their prospectuses, or another company that mentioned they would aim to be a 鈥渃arbon-neutral explorer.鈥� Even for those companies that are not explicitly tying their offerings to purposeful exploration for green energy technology, the influence and importance of environmental concerns is apparent.

M&A鈥檚 role in future green development

The Australian mergers & acquisitions (M&A) market also shows indications of an increasing focus on green energy transition among industries on the continent, albeit to a lesser extent than the IPO market. From July 1, 2021 through June 30, 2022 (the Australian fiscal year), there were 74 mergers or takeovers announced, with 17 of the target companies falling within the Metals & Mining classification.

Among these 17 transactions, only two mergers contained terms relating to energy transition, clean energy or net-zero emissions. However, these terms were contained either in the press release, the Chair鈥檚 Letter of the Bidder Statements or the merger scheme booklets, which indicates that these terms were used as one of the enticements to persuade shareholders to approve the merger.

For example, in an offer in which Kirkland Lake Gold Ltd. was targeted for merger by Agnico Eagle Mines Ltd., one of Agnico鈥檚 strategic rationales given to Kirkland shareholders to accept the merger was that 鈥渢he combined entity will be a leader in energy performance and greenhouse gas emissions intensity.鈥� Agnico also made a commitment that the post-merger company would be 鈥渘et zero by 2050.鈥�

The other merger involved IGO Nickel Holdings Pty Ltd. (owned by IGO Ltd.), which was seeking to acquire Western Areas Ltd. (WSA). WSA shareholders were told of IGO鈥檚 focus on 鈥渄iscovering, developing, and delivering products critical to clean energy鈥� along with the advancement of the 鈥済lobal transition to decarbonization.鈥� They were also told that the merger would assist IGO鈥檚 progress toward becoming a global supplier of metals to enable a clean energy future.

The materials of the future

So-called critical minerals of the sort being sought by many of the companies undertaking recent IPOs will be crucial to a range of different sectors. Australia鈥檚 Department of Industry, Science and Resources has noted the International Energy Agency鈥檚 prediction of increased demand of these minerals for electric vehicles and battery storage.

In fact, nine of the world鈥檚 top 50 mineral projects are based in WA, including six of the world鈥檚 10 most valuable mining projects, according to the Australian government. Given the pace of business transactions focused around WA mining 鈥� particularly IPOs for new exploration 鈥� it鈥檚 likely that this trend will only intensify as critical minerals demand grows further in the coming years.

Today, large firms house thousands of lawyers and realize billions of dollars in revenue. Others have become the go-to firms for niche practices. This is a choice many Am Law Second-100 firms now face, and for those that choose to grow, the miracle of a law firm merger should not be taken lightly. The reasons for mergers not happening can often outweigh the explanation of why they do. Culture and conflicts alone can often be insurmountable hurdles.

For those mergers that proceed, after months or years of evaluating client transition, risk tolerance, office leases, retirement obligations, succession, capacity, and economics, leaders will refine the strategic business case for a more profitable, more sustainable, diversified firm. This is when the work really starts and when disciplined, intentional leadership is needed. The following are seven observations that I gleaned from more than 25 years in legal services.

1. Communication first

When firms acquire another firm or merge, they are often trying to solve a problem with the merger that they cannot or will not solve on their own. Sentiments run high and often the greater goal of a combination can be lost to the emotional responses aroused. Communication 鈥� how, to whom, in what order, and through which platform(s) the message is delivered, matters. Communication in this type of event should not just be about the new world order 鈥� the combined vision and strategy to get there and the objectives to be realized 鈥� but also about the impact on the day-to-day. Employees want to know how this merger will impact them, their work, their team, and how they contribute. Leaders should communicate strategically with all firm members and remind them of the shared vision.

2. Know your stars and keep them engaged

Do you really know who your key management team is? During a firm transition it鈥檚 imperative that you know and recognize your key managers. Law firms have a history of falling hard for the most visible management leader, not understanding there is often another employee or entire less-visible team that is feeding that manager, doing the work, and providing the platform on which that manager stands.

If you do not know who does what, you may not really know who your key players are until they are gone. Indeed, your truly talented managers will leave during this transition period more than any other employee. And remember, your most important employees may be tremendously loyal to the firm as it is today, but that may not necessarily translate to the new firm and leadership structure. This is where communication comes back around. If your key managers are not in the know, they may take your silence as a betrayal. When you truly know who they are and their role within the organization, you will include them and pursue them in the change process.

In a normal environment, the ability to separate political self-promoters from legitimate passionate leaders is tough; and very often the most important people will not push themselves into the spotlight because they (perhaps wrongly) assume leadership will know or understand their value. Worse, they may know their value outside the new firm, and simply wait to see what happens. During this period, they will assess the newly merged firm and ask the question, 鈥淲ill the new firm and its leadership understand my worth? Or will the new firm give me a severance package to move on to a competitor who may pay more?鈥�

3. Tap your business leaders

Law firms are businesses. And while they are unique in the fact that they do not make or sell widgets, firms do sell intellectual horsepower and solutions. While some lawyers have a keen business sense and understand their client鈥檚 business well, they are no longer the probable choice nor the best-qualified to lead the business of the institution. Lawyers may be shocked by this statement, but clients are not. Big business and clients are betting heavily on business- and finance-trained leadership to guide their law firms to be the analytical, tech-driven, and efficient business advisors they need.

4. Engage your top two levels of management early in the process

Engaging your chief roles early in the process is usually a given 鈥� they are the expertise and reliability needed during such a transition. However, you will get the most bang for your buck by engaging with the next two levels below that 鈥� your directors and managers. If you have strong directors and managers, they will grasp and understand any potential pitfalls you may not see from the 30,000-foot view. Their perspective will provide insight into the employee or staff side, and often reflect any unvoiced concerns of attorneys as well. Involving them can ensure less surprises and reinforce communication, which in turn will help ensure success, or at least better acceptance and understanding.

5. Plan the work, work the plan

Have a process, a plan with specific and easily understood steps. The process doesn鈥檛 have to be perfect. Processes that can be followed do not cost money or resources; they save them. Processes are needed to accomplish a task, and a good process will make the firm integration move more quickly. There will always be risks that have not been identified and will not be until the merger takes place. But while there is no need to be the proverbial bull in a China shop, breakage will happen, just keep moving forward with purpose and follow the plan.

6. Caution: the builder will not live in the new building

During a merger, there are lots of external participants involved. These participants are necessary; but remember, the consultant or financial advisor will not live in the new building. These parties have their own unique perspectives and interests but are not around forever. Firm leaders should capture their tremendous value, gather information, and listen closely to their insights. Then, they should shift focus to those who will live in the new building together; continuing to build, grow, and maintain the new space as a combined entity.

7. Take the opportunity to drive impactful change

Law firms are often criticized for lagging corporate innovation and staying true to what should have changed long ago. Firms may have worked with the same people and processes for years, but a merger creates an opportunity where everyone鈥檚 tolerance for change increases. Combining two firms will always reveal more efficient processes, better solutions, and more value to offer the new and existing clients. Listen to your new partners, associates, managers, and staff. Take the best parts and practices of each firm, reject the waste, and remember that this immediate innovation was part of your strategic business case for the combination in the first place.

Finally, as the merger unfolds, remember that patience is key. History shows that optimization and top-line revenue growth of the newly merged firm will take time. Intentional and laser focused action is required of the business leaders 鈥� in the famous words of Bob Sugar, 鈥淚t鈥檚 not show friends, it鈥檚 show business.鈥�

Leaders should continue to ask themselves, 鈥淲hat鈥檚 best for our clients and their business?鈥� Successful firms meet or exceed client expectations by leveraging their strengths and investing in and inspiring their talent. Mergers are an opportunity to bring something new and better into the world. That must be your north star.

EisnerAmper said this 鈥溾�� will drive the firm鈥檚 鈥渓ong-term growth initiatives, which include accelerating the evolution of service offerings, investing considerably in talent and technology, and strategically expanding via organic growth and targeted mergers and acquisitions.鈥�

The deal is transformational and there are likely more to come, said Allan D. Koltin, CEO of Koltin Consulting Group and an advisor to accounting firms involved in many of聽the profession鈥檚 largest mergers and acquisitions. 鈥淧rivate equity has been trying to get into the accounting profession for 15 years,鈥� Koltin said. 鈥淭his journey started back in 2006 and, up until a few weeks ago, in the world of the Top 20 CPA firms it鈥檚 been unsuccessful.鈥�

Market changes have created an unprecedented demand for capital among accounting firms 鈥� for technology, talent, and strategic acquisitions 鈥� that opened the door for this type of deal, Koltin explained.

Merger mania and the growth imperative

鈥淔irms are merging fast and furiously to expand geographically and to expand their products and services,鈥� Koltin added. 鈥淎s a result, there are more larger firms in our profession today than ever before. When you get to a point in your growth somewhere between $100 million and $200 million 鈥� it鈥檚 like [getting] a target on your back. You have to keep growing. This business is unforgiving. If you don’t continue to grow you can’t continue to recruit and retain great talent. They go somewhere else.鈥�

To achieve steady growth, Koltin said, firms often employ a three-part strategy: pursuing organic growth, acquisitions, and top lateral hires from other firms. 鈥淭here are many buyers seeking acquisition targets 鈥� it鈥檚 become a feeding frenzy,鈥� he said. 鈥淭here are more of these deals happening, and there are more firms between $20 million and $200 million evaluating upstream merger opportunities than ever before.鈥�

In the past year, the industry has seen numerous large deals, including:

• • • BDO USA, a Top 10 tax & accounting firm, acquired Morrison, Brown, Argiz & Farra, a Top 50 firm in Miami. It was BDO鈥檚 eighth acquisition in the past year, according to Accounting Today, which reported that the firm鈥檚 revenues reached $1.8 billion in 2020.
    • CliftonLarsonAllen, the eighth largest firm in the country, acquired Blum, Shapiro & Co., the largest firm in New England, as well as Southern California-based White Nelson Diehl Evans.
    • Chicago-based Baker Tilly, the 12^th largest U.S. firm in 2020, acquired Top 40 Squar Milner, one of California鈥檚 largest firms.
    • CBIZ acquired the non-attest assets of Berntson Porter & Co., based in Bellevue, Wash.
    • Top 50 firm Whitley Penn, acquired Johnson, Miller & Co.
    • Wipfli, a Top 20 firm headquartered in Milwaukee, is merging with St. Louis-based Mueller Prost.
    • Top 25 firm Withum, based in Princeton, N.J., acquired San Francisco-based OUM & Co.

More to come?

This appetite for acquisition creates an incentive for more firms to pursue private equity investment, as does the push to automate through technology adoption and to compete for top talent. 鈥淭he EisnerAmper announcement is the first,鈥� Koltin observed. 鈥淚 think we鈥檒l see another Top 20 firm going the way of private equity in the next 60 days, and I wouldn鈥檛 be surprised to see a third sometime in the first half of 2022.鈥�

Private equity investors, he explained, are attracted to accounting firms because they believe they are low risk and recession-proof, deliver positive cash flow, and are poised for growth as the industry transitions to a more advisory-oriented service model. 鈥淭hey believe the accounting profession is going through a major transformation. Some firms are positioned to provide the next wave of products and services and industry specialization that the middle market is demanding. This will increase the price war on acquiring targeted accounting firms.鈥�

In this environment, a good acquisition target is an accounting firm that is growing, sustainably profitable, and has a young, talented team. 鈥淎nd it helps if you鈥檙e in a fast-growing market, like Seattle, Austin, Nashville, Palm Beach, or Washington, D.C. 鈥� markets that are recognized as fast growing with a lot of upside potential.鈥�

Transformation

As accounting firms further develop the products and services they offer, firms are increasingly acquiring non-CPA firms that specialize in technology, cybersecurity, client accounting services, outsourced services, and wealth management. For example, EisnerAmper recent acquired ZenTek Data, a consulting firm that offers cloud technology and enterprise security services.

Meanwhile, firms are competing to recruit specialists with expertise in specific disciplines and industries to bolster their advisory services, Koltin said. 鈥淭here鈥檚 not enough great talent in our profession today to meet the demands of all the firms,鈥� he said. 鈥淚t鈥檚 a bidding war, and firms also need this capital to buy the talent.鈥�