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Merger & accounting system review.

Case Study | James Burrett | 25th March 2019

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The professional firms industry has seen an intense consolidation of practices over recent years as the industry continues to struggle with succession of retiring individuals and larger practices are choosing to grow via the acquisition of other practices.

One of our clients was provided with an opportunity to acquire a four partner, which had an ageing partner profile and over latter years had suffered from a lack of investment and direction. Our client saw this as an opportunity to enter a new geographical market, which they had been considering previously investing in.

PEM were engaged to review several options of how to structure the acquisition but to also consider the tax, cash flow and profit implications of the deal. PEM were also involved with seeking and securing finance to complete the deal from a range of banks and other financial institutions within their network. This involvement led to a tax efficient structure (for all parties) and adequate finance being raised to pay the initial consideration but also increase the cash availability within the business to meet its increased working capital commitments of the larger firm.

With two firms different professional firms coming together there are also non-financial considerations that need to be controlled and managed. From the outset of this acquisition, it was evident that the accounting function, software and control systems of the selling firm were inadequate. This had led to poor running of the firm because the reports being generated were not adequate for making informed decisions but there had also been a number of reportable breaches under the Solicitors Accounts Rules reviews. PEM were engaged to complete a review of the current systems, operations and controls and provide advice on subsequent merger of the two firms, which led to PEM assisting with the implementation of new software, controls and reports to better manage the two firms as one.

The firm is now a very successful and key player in its professional sectors within it new and existing geographical locations and is continuing to grow. Management are now able to use real time information and reports of the combined business to in making key strategic decisions and the compliance with the Solicitor Accounts Rules has significantly improved.

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