Integration the secret to unlocking the full potential of mergers and acquisitions

Growing their practices through M&A has many attractions for advice firms, but integration of the additional entity has to be thought-through carefully, writes Michael Nathanson — who should know, having bedded-down more than 300 transactions in building Focus Financial Partners.

Growing your practice through M&A has many attractions for advice firms, but there are many potential banana skins – both along the way, and after the fact. Integration of the additional entity has to be thought-through carefully, whether it is the first merger, or the latest step in an acquisition strategy.

Whether consciously or not, advisers are – in common with other service industries – situated somewhere on what I call the ‘path from practice to enterprise’ – the primary stages of evolution that service organisations may reach as they grow beyond their original limitations.

In effect, there are four such stages on this path:

• Practice
• Collaborative
• Business
• Enterprise

Each of these stages is characterised by general principles.

• A practice has one or more people working together, typically under the ultimate supervision of one person, the practitioner. The employees are focused on providing or administratively supporting the main service functions.

• A collaborative typically has multiple practices loosely sharing resources and knowledge; the practices are generally un-coordinated with each other.

• A business is a group of people operating under a singular plan with a shared mission, vison, values, resources and knowledge, providing coordinated, consistent services. Employees have clearly defined roles, and there are dedicated management and operations personnel.

• An enterprise is a sustainable business not overly reliant on any one person or small group of people; its services, functions and ownership is sustained over time by new generations.

Many (although certainly not all) service professionals strive to be part of an enterprise because:

1. Only through an enterprise is continuity and succession assured for clients, employees, and other stakeholders;
2. Enterprises typically can offer a broader array of services, including ones that require deep specialisation;
3. Practitioners can more easily specialise and focus on their desired activities when part of an enterprise; and
4. The economic rewards, including through equity, associated with operating in an enterprise are typically greater than in the earlier stages of evolution.

The path from ‘practice’ to ‘enterprise’ often presents opportunities to merge, acquire, or be acquired. Each of these opportunities must be considered carefully, as they may offer a better and faster route to creating an enduring and more effective business. Done right, mergers and acquisitions can be powerful steps toward stronger offerings, faster growth, better talent, and improved efficiency.

Yet, many companies fail to understand that the ultimate success of a merger or acquisition depends not only on the intended purpose and structure of the transaction but also – and more importantly – on the integration process that follows. Carefully planned, coordinated, and executed integration is critical to realising the full potential of any true combination, ensuring long-term success for all stakeholders.

We have built Focus Financial  Partners Wealth through a series of acquisitions, although I prefer the term ‘merger.’ I don’t like the term ‘acquisition,’ because to me they are two different things and, regardless of size, the most respectful and accretive way to do transactions is merging companies together, taking the best of both worlds.

Integration is the key to this.

Having closed well over 300 transactions, at Focus Financial Partners we understand the importance of planning for integration before, during, and after each transaction. From a timing perspective, some integration milestones can be achieved immediately; others, however, may take months or even years, making the planning process even more critical.

While the list of our integration planning priorities and imperatives is long, here are my top five:

• Aligning cultures, values, mission, and vision

One of the most significant challenges and opportunities in any merger is understanding and aligning the cultures and values of both organisations. At Focus, we prioritise this alignment to ensure that differences are identified and proactively addressed. Otherwise, they can lead to disengagement, morale problems, high turnover, and ultimately, client and revenue losses. A clear, unified mission and vision consistent with both companies’ historic cultures and values is essential for collaboration and long-term strength and sustainability.

• Maintaining a core focus on clients

Clients are at the centre of any service business, so in a merger of such businesses, it is crucial to maintain a central focus on clients. Integration should involve assessing and improving the combined company’s offerings, client communications, and service protocols to ensure a client experience that validates what should be a central premise for the merger: ‘it was best for clients and those who serve them.’

• Retaining top talent

Failing to retain top talent can undermine the potential – or even the very intention – of a merger or acquisition. Therefore, in addition to the priorities described above, effective integration must include clarity around roles, reporting lines, career opportunities, equity ownership, and compensation and benefits. Whenever possible, retaining key leaders and experts from both companies ensures continuity, facilitates the sharing of expertise, and supports cultural integration.

• Streamlining operations

Effective integration should also involve streamlining operations and optimizing resources. By aligning and combining systems, team structures, platforms, processes, and technologies, companies can enhance efficiency, compete more effectively, reduce costs, and improve the experience of clients and team members. Focus continually invests in operational excellence, contributing to improvements in both organisational effectiveness and client service during our integrations.

• Achieving synergies

A well-executed integration plan unlocks financial synergies by enhancing revenue opportunities and optimising expense structures. Whether through improved service capabilities, greater expertise, new growth opportunities, economies of scale, or elimination of redundancies, the financial benefits of integration can help power the combined organisation for the benefit of everyone in an increasingly competitive world where every advantage matters.

On the path from practice to enterprise, well-planned and prioritised integration is key to unlocking the full value of most mergers and acquisitions. Communicating regularly across all levels during these periods of integration supports clear decision-making, fosters trust, and sets the stage for sustained success. This approach is essential for moving beyond the limits of the few to capture the full potential of many.

Michael Nathanson is CEO of New York-based Focus Financial Partners, a multi-billion-dollar group of fiduciary wealth management firms with partners located throughout the US and an increasing international reach that includes the United Kingdom, Canada, Western Europe, Asia and Australia.