Most M&A deals typically go through five stages: preliminary discussions; transactional detail meetings and negotiations; an initial agreement outlined in a memo of understanding or letter of intent; due diligence; and the transaction agreement and signing of the partner/shareholder agreement.
Quite often, I am asked what are the pertinent types of questions that should be asked by the selling firm in an M&A transaction in the first few meetings. The following are some examples:
Vision, Strategic Planning & Future of the Firm
- What is the vision and strategy for the firm for the next five years?
- What is the culture of the firm?
- Does the firm have an annual partner retreat and/or strategic planning meeting?
Partner Compensation, Management & Risk
- How is partner compensation determined?
- Do partners have annual goals and objectives? If so, how often are the partners counseled?
- Are partners held accountable?
- Describe your partner governance structure.
- When was the last time you updated your partnership agreement?
- Do you have partner meetings? How often do you meet?
- How is partner equity determined?
- What are your average partner billing rates? Staff rates?
- Has the firm gone through a de-merger or terminated any partners in the last five years?
- Do you have any professional liability claims that have not been settled?
- What has been your claim experience in the last five years?
- What is the structure of your IT department?
Succession Planning and Professional Staff
- How many equity and non-equity partners do you have?
- Are any partners planning to retire in the next few years?
- Do you have partner retirement payment projections for the next 10 years? Does the firm have a “cap” on retirement payments?
- What is your staff turnover rate?
- Describe your training program.
- How often do you counsel staff?
- What methods do you use to recruit staff? Have they been successful?
- Do you hold staff meetings?
- What is your current staff-to-partner ratio?
- Who oversees scheduling?
- What is the structure of your HR department?
Partner Marketing Activity
- What is the source of most of your new business? (If it is from referrals, what types of individuals and companies?)
- How many partners bring in new business? How many are “rainmakers?”
- For marketing purposes, is your firm organized into industry/service teams?
- Are the partners held accountable for their marketing efforts?
- Do you have new client acceptance criteria?
- What does the firm do to identify additional service opportunities with existing clients?
- Have you ever conducted a client satisfaction survey? If so, what were the results?
- What is the structure of your Marketing department?
- What are the firm’s strongest niches?
- Is the firm known as an expert in any industry?
- What percentage of the firm’s revenue is compliance vs. consulting/advisory services?
- What percentage of revenues is assurance vs. tax?
- Does the firm offer financial services? If yes, to what extent?