Behind the M&A: ‘Don’t grow for the sake of growth’
Having recently merged with specialist medical accountants MW Medical, Richard Bugler gives an insight into Albert Goodman’s merger and acquisition (M&A) process.
The UK's current lively M&A scene has presented an opportunity for firms looking to grow. Practices struggling with the volume of new legislation or unable to grasp the technological disruption, for example, are looking for an exit and fast-growing firms are standing by to snap them up.
Backed by Cogitalgroup’s deep pockets, Baldwins has extended its geographical footprint by snapping up firms in the Midlands and Scotland, while SKS Business Services is eyeing accountancy’s Top 20 thanks to a £10m “war chest”.
However, Albert Goodman’s managing partner Richard Bugler has warned against firms using mergers or acquisitions as “an opportunity to profit in the short term”.
“Growing for the sake of growing is not the right option,” said Bugler. That's not a good strategy, in our opinion.”
Speaking as Albert Goodman merged with MW Medical, Bugler said that “with any acquisition opportunity it would be of paramount importance that the firm’s culture and ethos fits with ours”.
So what factors should M&A-curious firms consider before signing the dotted line?
Albert Goodman has grown considerably over the last 15 years. Boasting nine locations in the South West and a headcount of 300, the 150-year-old firm’s merger with MW Medical shows it is not slowing down with age.
However, Albert Goodman acquired MW Medical for a strategic purpose, rather than just increasing its footprint. Data from this year's Accounting Excellence awards entries demonstrated how successful niching can be to a firm’s bottom line, with 67% of entrants taking it up as their primary marketing focus.
“By acquiring a nationally-recognised specialist firm we became that,” noted Bugler. “Albert Goodman can now rival the services of any accountancy firm in the country when it comes to healthcare.”
Culture and ethos
Albert Goodman has used previous acquisitions to gain a specialist advantage or realise a geographical strategy, such as its expansion into North Somerset. But its most important consideration is the culture and ethos of the identified firm.
“Having nurtured Albert Goodman over a long period of time, we have a culture we are very proud of, and that culture is to give absolute priority to our staff and our clients,” said Bugler.
So, rather than the bigger firm hoovering up its smaller counterpart, Bugler said Albert Goodman spends a lot of time getting to know the firms before merging.
“If they had a different motivation to us, say for example they were heavily profit-driven or were driven by cutting corners, that is not something that would appeal to us. You just shake hands and move on - no hard feelings”
The MW Medical merger showcased this thought process because it marks a homecoming for two partners at the firm who used to work for Albert Goodman.
Once the deal goes through
Quite often though, goodwill is thrown out the window once the merger or acquisition becomes a reality. But certainly in the short term, Albert Goodman decides to change very little, prioritising staff motivation and client service.
Bugler said that some clients may have some reservations when they’re advised that their accountancy firm has joined a larger firm. That’s why Bugler always considers the client’s point of view.
“They may think there are some benefits in a broader range of services but that also have some concerns that things are going to change, people are going to change, costs are going to change,” he said. “Our approach is to change as little as possible in the very short term and to try and keep continuity for people that deliver the service.”
Bugler emphasised that the firm will do its utmost to ensure consistency; for example, clients can continue dealing with certain staff members.
Evolution, not revolution
Albert Goodman would only consider changing the accounting function or the technology after a period of time getting to know the acquired firm.
“There will be areas because of our size and infrastructure where we can help and make improvements to make the firm more efficient. Ultimately we'd pick the good points out of the firm we've merged with or acquired and say 'that's a damn good idea, there is no point in changing that' because it is better than what we've got already.
Bugler defined this steady change approach as “evolution, not revolution”. After all, the process could take a period of three-eight years to properly bed in and settle before you could see it as a commercial advantage, Bugler said.
“All along it's making sure key stakeholders - staff and clients - are kept informed as to why we're doing it and the benefits,” he said. “Certainly, with any merger or acquisition, do not look at it as an opportunity to profit in the short term. Quite often that is something that is overlooked in mergers or acquisitions.”
Ultimately, the more you know about it before you shake hands, the better. Bugler concluded: “Do your homework, do your due diligence, try and explore every area and have those difficult conversations early before you've committed. If you don't find out those important areas, you may simply have taken on something that potential in the worst case is not workable.”