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How Innovation Is Helping to Streamline M&A Activity and What the Future Looks Like


by Kate Krupey


M&A activity has been on the rise in public accounting over the past few years. In particular, large public accounting firms are increasingly acquiring firms that have complementary client niches or service lines, or they are acquiring smaller firms that are struggling to succeed on their own. These acquisitions remain a popular growth strategy to supplement the slower organic growth process.

The volume and scale of planned acquisitions have created constraints and bottlenecks for acquiring firms. As with any acquisition, a host of considerations must be taken into account, including valuation and culture. Increasingly, the poor state of the technology infrastructure at the small firms, many of which abandon their efforts to keep everything up to date when they go into selling mode, has emerged as a major hurdle. A broader overhaul of the target firm’s infrastructure becomes an expensive and time-consuming exercise, while tactical integration introduces significant security exposure to the acquiring firm.

So, what’s the solution for financial firms that want to pursue an aggressive M&A strategy without letting their technology infrastructure become a barrier? The answer lies in accelerating innovation by partnering with the right managed service provider that combines knowledge of the CPA vertical with expertise in public cloud technologies like Microsoft Azure and a proven delivery platform.


What Is Fueling the Current M&A Landscape

The current reality is that many smaller firms are struggling to go it alone for a number of reasons including:

  • Clients are seeking a broader portfolio of services including client accounting services, consulting, wealth management, family office and international trade. Smaller firms may already be spread too thin and lack the resources to support more offerings. These new services are often the higher-margin services, shifting the overall economic mix for CPA firms and putting pressure on the traditional audit and tax services.

  • Smaller firms often lack the succession plan they need when founding members or second-generation leaders seek to retire. Up and coming staff don’t always seek the partnership path today, and partners don’t always seek the leadership roles as the pandemic has redefined this journey for many public accountants. These factors have served to expose gaps in talent planning, an area that can be overlooked by smaller firms.

  • Staffing issues have plagued the entire industry but hit the smallest firms the hardest. With a shrinking talent pool that is being aggressively courted by the larger firms with higher compensation options and more benefits and perks, the smaller firms get crowded out.

  • The smaller firms have also historically suffered from underinvestment in their IT infrastructure, leaving them struggling as the work paradigm pivoted to a hybrid model.

The Problem: Integrating the Acquired Firm While Keeping It Secure

While larger firms are actively pursuing the consolidation strategy, the reality is that they are struggling to close and successfully integrate everything in their pipeline. The ill-equipped or antiquated technical infrastructure at the smaller acquired firms has increasingly emerged as a roadblock. Overworked IT teams at the acquiring firms face tough choices:

  1. Implement stopgap integration of the underlying firm, opening themselves to significant cybersecurity risk.

  2. Leave the acquired firm as a stand-alone enterprise while waiting for their turn in line, severely limiting the synergies and drivers for the acquisition.

  3. Pursue a comprehensive migration and transformation immediately upon acquisition, a time-consuming and expensive ordeal that is not always possible based on the existing workload of onboarding projects including data migration and employee training on firm processes and applications. In addition, this work must be accommodated across an already overflowing plate of IT priorities beyond acquisition work.

Given the significant security, cost, and time trade-offs, none of the options consistently align with the broader business objectives of the M&A deal.

Microsoft Azure Provides a Compelling Alternative

Microsoft’s public cloud platform, Azure, provides easy access to IT infrastructure for computing and storage in a pay-as-you-go model with the underlying services being hosted by Microsoft. However, operating workloads in Azure requires skill sets and competencies that many firms may lack. A trusted managed service provider will address this gap, bringing expertise in Azure alongside proprietary tools to efficiently migrate and secure applications and the underlying infrastructure from the acquired firm to Azure. For acquiring firms, this route can be compelling for a few reasons:

  • End-User Experience: Using Azure Virtual Desktops and proprietary frameworks to optimize the performance of critical business applications like CCH Axcess or ProSystem fx Tax, CCH Engagement, Thomson Reuters CS Professional Suite, Caseware and Intuit QuickBooks, the end user can see a major improvement in productivity and performance.

  • Speed: Working with an MSP and its proprietary migration tool set, the acquired firm’s infrastructure can be recreated in Azure within a defined timeline, in line with the aggressive deadlines imposed by the M&A process.

  • Security: The MSP can implement the necessary security controls in the new Azure environment – such as MFA, geo-blocking, advanced firewalls, threat detection, vulnerability management – enhancing the overall security posture by a step function.

  • Capacity: The capacity of an MSP allows firms to work through the onboarding tasks and smooth out the scheduling of data conversions and training. While the MSP can take a lot of the backend workload off the acquiring firm, the firm’s newest employees will turn to internal IT as trusted resources in their new environment. This allows the internal IT team time to focus on the people centered tasks around bringing a new firm into the culture, setting the tone for future success.

Partnering with a CPA-focused managed service provider enables acquiring firms to achieve their business objectives, manage risk, balance internal workloads, and improve ROI. Ultimately, it also offers a compelling pathway for an acquiring firm to chart a broader IT transformation game plan underpinned by a public cloud like Azure.

About the Author

As Vice President of Accounting, Kate Krupey uses her deep insight into CPA firm needs and operations to further extend Netgain’s value to the CPA profession, strengthen the overall client experience, and grow the Netgain brand within the CPA market. Kate was formerly the CIO of Maryland-based KatzAbosch and has a proven track record for driving the adoption of change in CPA firms, positively impacting efficiency, revenue, and culture. Since leaving KatzAbosch, Kate has worked with dozens of CPA firms on transformation initiatives centered on change management, process improvement, and solution development.

Kate graduated from Drexel University with a Bachelor’s Degree in Psychology and a concentration in Information Systems. She holds MCSE and PMP certifications and has been trained in Lean Six Sigma methodologies for the CPA vertical.

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