Succession planning
You can’t live without it, especially during a merger
Susan I. Schulzetenberg, CPA | April/May 2025 Footnote
Editor's note: Updated March 26, 2025
I wanted to merge when I didn’t need to but wanted to. This wasn’t a decision born out of hardship — I wasn’t facing illness, struggling with staffing or ready to retire. In fact, my firm was thriving; we had a dedicated team, loyal clientele and a strong track record of success.
My primary focus has always been, and will continue to be, the well-being of my clients. I recognized an opportunity to provide them with an even higher level of service and a more secure future so they’d always be taken care of.
I had various succession plans in place for more than 10 years, but the plans changed throughout the years as I kept in contact with possible options. My initial succession plan was to prepare staff to take over, but that approach didn’t work out. My next succession plan, which took me a year to implement, was selling some clients to another firm to alleviate my workload. This plan worked well, which made me realize I didn’t want to wait any longer to merge.
I chose four firms I thought would be a good fit. I met with the partners, looked at their processes, asked a lot of questions, met with tax and client accounting services staff and had multiple meetings to make a very calculated decision.
My entire team and I were eager to continue working. I was paperless and had good processes, allowing me multiple viable alternatives. When you are in negotiations with multiple viable alternatives, you are no longer playing in a position of need, but from a position of strength.
One year after the sale of some of my clients, I merged my entire firm into John A. Knutson & Co., PLLP. I started the merger-due diligence process in May and the merger was completed by early January.
A smooth transition hinges on clear communication, well-defined expectations, and a structured approach. Whether you are the buyer or the seller, having a solid succession plan is the key to a successful merger.
This article outlines what needs to be done, how, when and by whom, thereby ensuring a seamless transition for both parties.
The exact needs for both buyer and seller
First and foremost, the buyer should do their due diligence on the seller by looking at procedures, workpapers and systems, while the seller should do the same. The seller’s review of the buyer is very important so the seller knows they are merging into a firm that has the same culture, personalities, procedures and is a place the staff would want to work.
The foundation of a successful merger lies in clearly defined expectations— meaning that both buyer and seller need to articulate their exact needs. Expectations from both parties should be documented in a written list and include a detailed timeline with all deadlines. Crucially, it should also specify which items the buyer and seller should discuss together.
A letter of intent should spell out terms, purchase price, wages, number of hours expected and a timeline of implementation. The letter of intent should also align with the purchase agreement.
Both buyer and seller should have a good attorney to keep the process moving and close the deal.
The buyer’s and seller’s checklist: A roadmap for success
The buyer and the seller should create a comprehensive checklist of items that need to be done. This should include an exact timeline for each task, when it will be done, why it will be done, how it will be done and who will be working with the seller to complete the task. The buyer’s and seller’s checklists should be aligned.
The checklist should include discussion and details about:
- Employee titles and hours: A clear understanding of current employee roles, responsibilities, duties, experience, knowledge level and working hours is essential. This ensures continuity of operations.
- Employee issues and benefits: Identify any existing employee issues and understand the current benefits.
- Software programs: Determine which programs are in use by the buyer and the seller, and which programs make the most sense to be used after the merger. Identify changes needed and how any new processes will work.
- Processes and procedures: Write down the processes of the selling firm. Create a flow chart to show how that same process will be done after the merger. If changes are needed, create a timeline together to ensure there are no disruptions in client services.
- Office space: Decisions needed for leases in effect, maintaining existing office location and new office spaces.
- Telephone numbers: Keep existing numbers in place for the first year and add alternative numbers.
- Computer server: When information is moved from one server to another, determine the migration process and if the data’s structure and accessibility will be affected.
- Management: Identify staffing and management expectations. Identify who will train, mentor and supervise.
- Seller’s intake process: This should capture the seller’s official business information, including official business name, physical address, contact person’s name, email address and phone number to avoid any client confusion.
The buyer’s internal needs and communication
The buyer should have a list of their own needs. Something that should be determined early is who — within the seller’s organization — it is OK to talk to about those needs. During a transition, direct communication with specific individuals is crucial. This avoids confusion and ensures the right information is being shared. This also maintains the harmony and workflow staff are used to.
Managing the transition and communication flow
If the selling partners remain employed by the buyer firm, the communication flow needs to be carefully managed. In such cases, weekly or monthly check-ins are highly recommended. During these check-ins, each party (buyer and seller) can describe the tasks they are doing that month, review the timeline tasks and flowchart, to ensure everyone is aligned.
The seller is going to be extremely busy the first year of the merger doing client work, managing staff, learning new systems and getting to know other staff. Don’t expect your workload to decrease the first year after the merger if you are going to work for the buyer firm and maintain the same clients. Adjustment takes more time because of additional communications with clients explaining the merger and discussions with buyer firm partners and staff during the transition.
The merger: A complex undertaking
For any merger, there is a lot to do. From integrating systems to ensuring consistent client service, the challenges are numerous. However, maintaining the same level of client services is paramount. Both the buyer and seller need to work together to ensure a smooth transition for clients.
As professionals, we have a duty to maintain client confidentiality. Thus, the seller firm should obtain signed client authorizations to grant permission to provide copies of relevant working papers related to client engagement to the buyer firm. This applies even when merging the entire firm.
A strategic merger: Timing is everything and staffing is key
While being short-staffed might seem like a compelling reason to merge, the reality is that a merger is best approached when you have a full, strong team in place. If your firm is already struggling with staffing shortages, a merger will likely exacerbate the problem. Mergers bring increased workload and could stretch a short-staffed firm even thinner, leading to burnout, errors and decreased client satisfaction.
Merging when you have a full, competent staff offers a multitude of advantages:
- Smooth integration
- Retention of talent
- Stronger negotiation position: A firm with a full staff is seen as a valuable asset. This strengthens your negotiating position, allowing you to secure a better deal and attract more desirable buyers.
- Attracting top talent: A successful merger can create new opportunities for professional growth and advancement.
- Enhanced client service: With adequate staffing, you can maintain and even improve client service during and after the merger. This ensures client retention and strengthens the reputation of the merged entity.
While the temptation to merge to alleviate staffing shortages might be strong, it’s a short-sighted strategy. A merger is a significant undertaking that requires a strong foundation; thus, a well-staffed firm is not only better positioned to manage the complexities of a merger but also becomes a more attractive target for potential buyers — ultimately leading to a more successful and profitable outcome.
Continuation and maintaining client relationships
Even after the initial merger is complete, there is often ongoing communication and collaboration that needs to take place between the buyer and the seller. Maintaining strong client relationships throughout the transition is critical for long-term success. This dedication to our clients ensures the continued success of the merged entity.
Ensuring a plan for the future
Succession planning is not just a good idea — it is a necessity, especially during a merger. By defining expectations, creating checklists, establishing clear communication channels and maintaining a structured approach, both buyer and seller can navigate the complexities of a merger and ensure a successful outcome for all stakeholders.
Susan I. Schulzetenberg, CPA is a director at John A. Knutson & Co., PLLP. She has dedicated more than 30 years to building a successful accounting and tax business with a focus on client care. She also finds great fulfillment in mentoring younger professionals within her firm, ensuring they are equipped with the knowledge and skills necessary to advance their careers. You may reach her at sschulzetenberg@jakcpa.com or 651-379-5780.
