Marketing specialist Lee Frederiksen, a partner at Hinge, writing in Accountingweb points out some of the benefits and pitfalls of practice mergers. This is a great way to add credibility and expand the practice, but there is a danger you might end up creating market confusion when you deviate too wildly from your core strengths.
At first blush, mergers can seem like a foolproof way for your firm and its brand to grow quickly, but it’s just as easy to fail as it is to succeed.
M&A’s have become an increasingly popular strategy for accounting firms. They are attractive largely because they offer a relatively quick way to gain credibility, add intellectual firepower or change the balance of power in a particular market. But, as with any growth strategy, they come with their share of risk.
In this post, we’ll cover three major, brand-related pitfalls associated with M&A’s and how to avoid them.
1. Loss of Differentiation
One of the most potent benefits of establishing a strong brand identity is the value that can be achieved through uniqueness. In other words, having strength in a specific service or industry provides a firm with value that clients are willing to pay for.
Any merger or acquisition that can dilute a firm’s uniqueness poses a risk to that firm’s value. The take-away: avoid any M&A in which the features and the benefits they provide have no real relevance to your target audience.
If what the acquired firm offers does not directly support and enhance what your firm does and provide a strengthened competitive advantage, it’s not an asset – it’s a liability. The best course of action is to avoid this situation before you begin merger talks. However, if you’ve already made the commitment, don’t panic, you can still pull it off.
Start by modifying your target audience to accommodate the combined services you’ll be offering and then develop a new set of strong differentiators. Remember, for differentiators to work, they need to pass the three tests — are they true, relevant to prospects at the time of selection, and provable?
2. Marketplace Confusion
M&A’s can be especially attractive to firms seeking to expand their services and tackle new markets. What better way to do that than getting together with a firm already established in the sought-after market, right? Well, maybe not.
The risk here is marketplace confusion – what exactly does this new, “enhanced” firm do?
Here’s an example: Let’s say a highly-respected accounting firm specializing in manufacturing – we’ll call them Firm A – sees a strategic advantage in adding cybersecurity services to help their clients protect their critical financial information.
This may seem like a logical extension of services and a good idea. So Firm A acquires a company that provides cybersecurity to retail businesses. Mission accomplished, right?
Not so fast…
What exactly is this new hybrid firm? Is it an industrial accounting firm with cybersecurity capabilities? Is it an IT security firm offering industrial and retail accounting services?
You can see what’s happening here – marketplace confusion. Both firms have now squandered whatever hard-earned brand equity they had developed.
This whole confusing mess could have been avoided with some foresight and research to develop a solid, integrated business and marketing plan. That would enable them to position the merged firm in a targeted manner to help current and potential customers clearly understand the merger rationale as well as the new, expanded services and their specific benefits.
The moral of the story is to pick consistent positioning and build stories around specific services to specific target audiences. Train your team to avoid confusing messaging and focus on clarity in your communications. Offering more services to more audiences isn’t necessarily a benefit.
3. Internal Distraction
There’s no way around it, M&A’s and post-merger integrations tie up a lot of internal resources and usually involve most of the firm’s senior executives. This can create a major distraction as they try to sort out what requires their attention and when.
The potential for the greatest and most disruptive distractions occurs when the deal is done and the integration process begins. Confusion can set in and senior management can become overly distracted, trying to juggle integration with ongoing business concerns.
If people get overwhelmed, the merger can flounder and the underlying business can suffer as well. That’s a lose/lose situation.
The solution is to designate a specific team to develop a step-by-step integration plan. This plan should include researching and developing strong new differentiators, a combined positioning statement, and marketing tools such as a new website that will enable you to ramp up outreach and track success. Be aware, though, that all this will take time and effort, so be prepared to commit additional resources as needed.
Planning for Success
Research, planning, and disciplined integration are key for succeeding where others might fail. Avoiding these three pitfalls will minimize risk and significantly increase the likelihood of success.