What’s the real deal? Practice management systems matter in M&A. Here’s what to look for.

M&A activity remains strong in the accounting industry—and, it is likely just the beginning of a long race to obtain capital and competitive advantage. Firms hungry to grow through acquisition, along with the entrance of private equity investors, are driving the buyer’s side of the equation and the need for exit strategies and growth capital are driving the seller’s side. Plus, the accounting industry is ripe for roll-up, having never undergone a major consolidation like so many other sectors have.

If you’re looking to buy or invest, getting the most for your money in a market filled with options requires access to reliable information so you can identify and value targets wisely. Amidst a growing need for transparency, technology is playing an increasingly bigger role in streamlining the due diligence process and improving outcomes.

Here are the Top 5 things to consider from systems perspective when you’re looking to acquire or invest capital into an accounting firm:

• Are the prospect’s data and systems integrated or are they held together with the IT equivalent of duct tape and glue? Many firms, whether they’ve grown through acquisition or not, find themselves with a complicated environment of disparate, unintegrated systems because they’ve built their own, relied too heavily on spreadsheets, or purchased siloed, point solutions to solve issues as they arise. Unraveling a tangled legacy environment delays post-acquisition integration and depresses return on investment.

• Can you understand the seller’s IT systems? Even if a seller’s systems are mostly integrated and seem to work pretty well, they may not be interoperable with other firms. If it takes you a long time to figure out how processes flow and accounts are structured, you are probably dealing with a highly customized, rigid environment. Data transfer is another concern. You should be able to align your data with theirs quickly and with minimal hassle.

• Do you have full transparency into the quality of revenue? As a private equity investor or a firm seeking to grow through acquisition, you’re looking for recurring revenue and strong customer relationships. If you can’t see what drives those revenues by drilling down into the details of pricing, billing, collections, sales productivity and customer success, then you may not be getting what you bargained for. Similarly, if a seller’s customer relationship management (CRM) functionality is behind the times, then it may not be able to develop, maintain, and enhance key client relationships.

• Is the seller’s system environment secure? With data breaches making headlines almost daily, the reputation risk associated with failing to protect personally identifiable information is growing exponentially. Aging on-premise systems can be particularly vulnerable since security patches may no longer be available from the solution vendors. The expense of “do-it-yourself” security may curtail your return on investment.

• Can the seller’s practice management system support growth? The ability to continue to close sales, along with the scalability and flexibility to accommodate both new customers and the professionals needed to serve them, are essential factors in determining the viability of a prospect. Aging, on-premises systems can be costly to integrate, update, and expand, especially when merging with another entity. In some instances, the limitations of the legacy systems, and their inability to scale to support growth, can quickly negate the purpose of the deal.

All of these considerations point to the need for a unified, all-in-one Practice Management system that quickly gives both buyers and sellers a view of the business based on reliable, real-time data. While technology isn’t a panacea for everything related to a successful deal (i.e., cultural compatibility still plays a big role), it goes a long way toward addressing the operational and informational aspects.

A unified, plug-and-play, cloud-based system like PracticePro 365 is easy to use and it can be accessed from anywhere. With a single source of truth and infinitely customizable dashboards, it enables you to track billings, receivables, time entry, work-in-progress, customer data, sales pipeline, and more, so you can identify any sticking points early in the due diligence process. Plus, with its familiar Microsoft user interface, both buyers and sellers can check the pulse of the business in real-time, and dive into the details when needed with interactive query capabilities. PracticePro 365 also eliminates the need to invest separately in automation, analytics, mobility, and security—all of which are “baked in” to the system.

For these reasons, having a unified cloud-based system is essential for identifying acquisition or investment targets and realizing the expected value from a deal. Today, an inconsistent tech stack is simply not worth the hassle since it limits a firm’s ability to grow and scale. Nor is it favorable for developing and retaining up-and-coming talent, which is essential for sustaining the organization.

Contact us for a PracticePro 365 demo and to see how a unified cloud-based system can help you turbocharge your growth or investment strategy and maximize your return on investment in an M&A market that is hot—and getting hotter.