Welcome everyone to The Upstream Leader Podcast. Today’s conversation is going to focus on mergers and acquisitions, and maybe sharing some lessons learned and some ideas on how you can successfully lead through a merger. And our guest today is Bruce Zicari, the managing partner and CEO of the Bonadio Group, and he was also recently named to one of the Forbes lists of the top 200 CPAs in America. So Bruce, I guess, congratulations, and welcome to the show.
Thank you, Heath. Very happy to be here today.
Well, Bruce, something we ask every guest right out of the gates is, what really molded you into the leader that you are today?
Well, I started out, right out of college practicing with my father and my grandfather. We had a family accounting firm, and actually I worked with them even through high school and college, learning a lot about the business, learning a lot about leadership, a lot about developing relationships. And that really, you know, really kind of kicked off my career and it got me on a good track. and then, of course I merged my firm into the Bonadio Group and then Tom Bonadio was a mentor and a guide for the last 25, 27 years, and, that’s really been invaluable. And so, so really the people that I surrounded myself with and the people that I looked up to as mentors to me made all the difference in the world.
Yeah, Bruce, that’s awesome to hear that legacy continues and it sounds like they had you doing an internship in high school before, even before college time. So that’s great to hear. Well, Bruce, you mentioned merging into The Bonadio Group. I think maybe some good context or foundation for our discussion. Can you tell our listeners maybe a little bit about your firm before we get into our topic?
Absolutely. So, right now we are about 1,100 people. We’re 120 partners. We are predominantly a New York State based firm, but we have recently expanded into Texas, into Dallas. We have about 85 or 90 people in Dallas with our recent merger there. We’re a very growth oriented firm. There’s been a great mix of both organic growth, of somewhere in the 10 to 12 percent range almost year after year, as well as merger growth over the years. We’ve done quite a few mergers over the last, 27 years or so, you know, we’re very much a go to market industry niche fashion. So we’re organized by our eight major industries, and what our goal is to continue to grow in the Northeast, down the East coast, and, and certainly in the, Dallas, and even beyond the Dallas area regionally in the state of Texas.
And Bruce, you had an opportunity to speak at Headwaters last year, and unfortunately, I think I was speaking at the exact same time, so I did not get an opportunity to sit in on your session, but I heard, you know, a lot of good feedback and then had a chance to kind of take a look at your slides and in mergers and acquisitions, it just continues to come up almost on, I don’t know if I’ll say daily basis, but probably at least on a weekly basis, in conversation. So you said you’ve done several over the last 27 years or so. just give us an idea how many mergers or acquisitions have you done in that timeframe?
We’ve done 22 mergers over the last 27 years. And, the merger of my firm into the Bonadio Group was our very first merger actually. But, 22 mergers over the last 27 years. So we’ve done a lot of them and certainly learned a lot of good lessons over time and you know we get better and better at them but it’s definitely an art and not a science so there’s always something to learn.
Yeah Bruce, I’m sure they were all the same and they were all easy out of those 22. But so Bruce, one thing I’ll go back to you said you’ve done 22. How would you, I guess in a way, how would you, how do you know when a merger is successful? How would you define that?
You know, I think at the end of the day, you know a merger is successful when, you know, one and one equals three or four or five, right? Where you can come together and you make each other better. And, that’s really, that’s been behind our strategy from day one is how do we come together and make each other better? You know, typically the firms that we merge in, they have great talent. They have great leadership. They have great relationships in their markets that we don’t have. And we have all kinds of great resources, and great expertise. We surround them with all the best. And all the tools that they need to serve their clients.
So when you put those two together, their relationships and their great people with all of the resources of a large firm, you know, at one to one equals more than two. And, that, really, you know, so at the end of the day, I mean, if we can look back after the first several years go by and we can see that we’ve created opportunity for their people, we can see that we’ve brought work that we could have never got before, that they’ve been able to service their clients better and give them more resources and more expertise and help their clients grow and be successful, and that everybody’s happy, right? That we all like each other after three or four years and the partners and all of the people can say, I am very happy that this was one of the best moves of my career. If we could say that after the first several years, and everybody’s still all in and really happy, that’s a win-win.
Yeah, Bruce, I love hearing that. I’ll share an example. I was just on a call, it was actually earlier this week, and one of the firms, there was kind of a peer network group sharing different topics, and one firm was talking about, they were looking at a few different mergers, and they actually just went through one. And they said they’re, you know, several months into it, and there are still team members from the firm that merged in that had this fear of, gosh, you know, are we going to be here? Are they going to keep us? And there was that kind of that fear based approach. How much do you think, because, you know, there’s some uncertainty whenever you go into a merger. I guess in a way, how do you work through those emotions or that fear based mentality because you said something I really liked, we all like each other and we see it as a win-win-win, I’ll say win for the firm, for you, win for their firm, and then a win for their client base. So, any thoughts on maybe how to work through those fears and those emotions, so it is that win-win opportunity?
I think it starts with the partners, right? I mean, we will not do a merger unless every one of the partners are enthusiastically 100 percent in, and excited about the combined entity, right? The end result. If the partners are all in and excited, people are going to sense that. And we have a whole process whereby we sit down one-on-one with every one of the new teammates of the firm that we merge in, and we talk about what is it they like to do? What are their passions? We talk about what their role looks like in this new situation, because there is a lot of anxiety, right? There’s a lot of anxiety anytime you change something, and a merger is a big change for the people involved, you need to really spend a lot of time with them, understanding what this means to them.
A lot of one on one meetings, we have this promise team structure in our firm where every employee of the firm is part of a promise team and each promise team is headed by a partner. So every single person in the firm, no matter what level you’re at, you have a partner mentor, a promise team leader that there’s a regular dialogue. That has been very important to us that somebody can talk to a partner on a very regular basis and has a great relationship with them. It’s not the first meeting and, okay, we met with them and now they’re feeling good. Now they’re going to move on. It’s a whole process whereby, you know, every day, you know, on a regular basis, there’s things that come up that make people nervous.
So, that whole process of integration and our promise team leaders and one on one meetings has made a big difference. And we have a good track record too, right? I mean, we have a track record of 22 mergers that have all been successful. You know, you can talk to anybody that came in from any one of those firms. They will tell you, this is, this has been a great experience. So, those two things have been helpful.
Yeah, I love hearing that, Bruce. I’m going to go back to something you said. You mentioned the promise team, you know, having a partner that they can directly go to. Do you, whenever you do that, do you ever cross pollinate between firms whenever a firm comes in? Do you ever have current Bonadio Group partners that are assigned to other team members from their firm?
Yeah, absolutely, and that’s a great, that has been a great way for, to indoctrinate them into our culture, right? To cross pollinate, to have one of, you know, one of our partners take on a number of our new teammates, to have each, to have these teammates, you know, work with each other because these, promise teams do a lot of activities together, right? They do social activities together, they have meetings together. So it really does help to indoctrinate them into our culture and make them feel like they’re part of the larger and bigger team.
So Bruce, you mentioned the 22 and throughout the past several years, I guess at what stage in that life cycle did you as a firm step back and say, yeah, we’re doing more of these. We need to put some sort of process in place because sometimes it’s done, and then it’s like, oh gosh, now what do we do? So at what stage in that path, did you realize that we need a process for future mergers?
Yeah, you know, we probably the first, you know, half a dozen to a dozen mergers, we probably were winging it. We were, you know, trying to do the best we can. We were learning as we went and it, you know, as we went from one merger to the next, it became very apparent that we had to have a process. We had to have a very defined process all the way from, vetting mergers, vetting merger candidates, to getting to know them, to doing it, you know, to issuing an LOI, doing our due diligence, finalizing the deal. The communication that goes into, communicating with the people and clients, and then finally the integration. And now we have a whole, I guess you could call it operations manual that kind of documents all that from start to finish.
Awesome to hear, Bruce. And yeah, as I think about that, we’ve talked a lot about successful mergers and you kind of shared some of the process of getting to know the firm and really better understanding if they’re a good fit for you and if you’re a good fit for them. Is there any, I guess, guidance or, you know, at what point in that stage do you know that maybe this isn’t the right fit? When do you know it’s time for you to walk away or maybe time for them to walk away? And I guess, Bruce, that’s not a bad thing when I ask that because sometimes it may not be a good fit.
Oh, I mean, I bet you, we talked to, for every merger we do, there’s probably 10 or 12 or more that we don’t do that. We decide, you know, that we might have a few, initial conversations and we decide that’s, you know, this isn’t for us and, or it’s not for them, and so, you know, we look at the, you know, the process of getting to know a firm we kind of look at as a dating process, right? We’re going to go on our first date and it’s usually a phone call and we’re going to talk and it usually lasts an hour or two, and we’re going to get to know each other, and if we still like each other, we think that there’s some alignment in the way we think and in our cultures, we’re going to go to the next date. And then we’re going to meet in person. And then we always have dinner. And, you know, there’s always some component of sitting down and having dinner together and strategizing on how, what it all looks like, and how do we get one on one to be more than two.
And, you know, in varying situations along that spectrum of meetings and getting to know each other, there invariably is, you know, you come to these, kind of a crossroads where you’re either one party, the other says, you know, this probably isn’t for us. And we take a lot of time getting to know one another. The two most important things, do our cultures match and do we like each other? And you know, that is absolutely, if we don’t have that and you know, do we like each other? You usually know if the first kind of conversation, their first cup of coffee, you usually know if, you know, if, hey, I could see myself being partners with this individual. So, yeah, we walk away a lot and we take some, a lot of time to get to know each other and strategizing and assessing the cultural compatibility.
And Bruce, I, got, I have to think that when you said, yes, we, take a lot of time, but gosh, I have to think if you do that on the front end and make sure that it’s a good fit, you’re saving yourself a ton of time on the back end. Because if you do something that’s not a good fit, I have to imagine that it’s going to, it can be painful. It can take a long time to get that on the right track.
For sure.
So Bruce, with those that you’ve done and you look back over the years, kind of getting into the lessons learned, if you could go back in time, thinking about some of the mistakes that maybe have been made, if you could go back in time, what would you do different?
You know, if I think back, some of the earlier mergers we did, we didn’t spend enough time on the integration. You know, you spend all this time and all this work and you get to the merger date and you announce it and everybody’s excited. And in the earlier mergers, we didn’t spend enough time integrating enough time, we didn’t spend enough time getting to know their people, having their people getting to know us. We didn’t spend enough time educating each other on, hey, what is it that you do? And what are you know, where does your passion lie, and what are you good at? And, you know, and really kind of making sure that we, again, when we talk about surrounding them and their clients with all our resources, that takes time to educate them. What are those resources? How do they access those resources? You know, how do they bring those resources to their clients? There’s a lot of work that goes into that. So, you know, that really is a big thing.
And another lesson we learned is, you know, we used to kind of, go all in. The first week we would inundate them with all kinds of trainings on our systems and different, you know, our, service offerings and all kinds of things like that. And we realized that was too much. It was too much all at once. We decided that we would stage the orientation and it wouldn’t be all the, you know, the first three, four or five days where you’re, you know, they’re drinking out of a fire hose. So those were a couple lessons. I mean, we learned many lessons, but those were a couple that we learned about the integration aspect of it. ’Cause I see too many firms, they do the merger and then the integration part just falls by the wayside. And that’s, that more than anything is when mergers fall apart.
Yeah. Well, Bruce, it’s when the merger is announced, it’s not over. I think there’s a lot that probably goes on. We can take a deeper dive into that as well. But Bruce, just out of curiosity, and I know it may be hard to put an exact time frame on this, because it could be different based on, you know, firm size and the situation. But just on average, do you have a ballpark idea on how long the merger process takes from beginning to end?
I would say from the initial conversations to the merger date, it’s typically somewhere around eight to 12 months. Then you know, and then I would say from the merger date to kind of where you’re really feeling like you have really integrated is usually a couple of years. It’s a lot of work. I think that, again, as I look back, some of our earlier mergers, the integration was too slow and took too long. I mean, you know, you always want to give a little bit of latitude, I mean, to the people and the partners to kind of get on to your systems, to do things your way. And, you know, we, there’s been many mergers where we have adopted to their way, right? But whatever the two firms decide is the best way, and I think both firms have to be open to it. Obviously, most of the change is them coming onto our systems and doing it our way. But we have certainly been open to doing it, you know, to tweaking and changing based on some of the best practices that they bring to the table. But whatever that is, you can’t wait too long. We used to wait two to sometimes one, two and three years before everybody got on the same platform and was doing things the same way, and that, just, that doesn’t work.
And so, we give them some latitude. We usually the, you know, we usually do a merger in the fall of the year and we usually give them quite a bit of latitude from the fall of the year till April 30th to kind of get through their first busy season. But then once we get to that point, we’re fast and furious over the next 12 months with, really getting all of us getting on the same page.
Yeah, Bruce, how you described that, if you wait too long, it’s almost like two separate firms still operating differently, although you may have the same name. It could be still operating in those silos. So, Bruce, let me take a maybe a different angle on this question. We’ve talked a lot from, your seat as CEO and managing partner. Any advice for, we’ll say maybe managers, senior managers, newer partners in a firm, let’s say from the acquiring firm on things that they could do to help the incoming firm be more successful? So any guidance, cause I don’t look at it as just a leadership, it’s a firm embracing. So any thoughts that you have or guidance that you have for others within the firm?
You know, one of the things we’ve done recently is we have a buddy system, where we have, you know, managers, senior managers, from our firm, buddy up with people from the firm that we are merging in. And, again, a great way and, our people are great. Our people, again, I think our people, even more than the leadership, they make this a smooth process. They embrace their fellow colleagues that they know that this can be a big change, this can be a struggle for people. They embrace them, they buddy up with them, they’re there a phone call away, or walk down the hall, whatever it may be, and they will put everything down and help them with whatever question or concern they have.
That really has been a great thing. I mean, we try to do a lot of social things together when a new firm comes on board with all levels of our firm, we have once a year where we bring everybody together in person to get to know each other. So you know, we have the, as I mentioned, the promise teams that are a mixture of new firm, old firm. So we really try to bring them together to help each other, to socialize together, to get to know each other, and that’s been a game changer for us.
In a lot of ways, Bruce, it sounds like you’re very intentional about building connection. and that communication in any relationship, even outside of our professional relationships, communication is critical in building that connection. So, Bruce, if you’re okay with me asking this question, you can always say no, I don’t want to answer this. But thinking and reflecting about, you know, watching what I’ve observed over the past, you know, several years in the profession, sometimes it is hard for a firm, I’ll say the incoming firm, “We’ve been successful, why would we want to change or, gosh, why would I want to adopt to the Bonadio Group’s processes?” And it sounds like you’re doing a really good job on the front end with the due diligence side, but are there any, maybe, success stories or win stories where maybe you’ve had an incoming partner that’s like, you know what, we’ve been successful. This is the way we want to do it. Not your way. So do you have any examples of that or maybe how you’ve maybe guidance on how to overcome that?
Yes. I have a recent example. I mean, we just did a merger recently, where the firm had gone through this whole, six sigma process whereby they re-engineered their whole tax process. And they felt like they put a lot of work into it. They felt like they had a great system that worked well for them. And although during the due diligence we tried to set expectations that, you know, that, we recognized that they had a very good system. we rec we discussed probably taking some things, some parts of what they do, because, you know, we were impressed by their system. But at the end of the day, in order to have a firm that works together, we have to have all be on one system.
Yeah.
So, you know, you can set expectations all you want, and I think, you know, you have to have those hard conversations ahead of time, but invariably you’re going to get people that well, wait a minute, I understand we all have to be on one system, but isn’t this one better? And, you know, and they’re looking at it sometimes myopically, you know, yeah, it’s better for them, but we have to look at what’s better for the whole, the entire 1,100 people of The Bonadio Group. And, you know, involving them in the, making sure that we’re not telling them what to do, that, that we involve them in the transition, that they’re part of the decision making process, that they understand why it’s important to all be on one system, they understand for each, for everything we do, you know, why it’s important for the 1,100 people, you know, we’re going to bring in an independent third party that is going to help us kind of put this whole process together with this firm we just acquired and our firm and our tax process. And we want them to understand we are very serious about taking the best of the best, we’re going to bring in a third party, we’re all going to sit down, everybody’s going to have say, and we’re going to make the best decisions.
So, we know our tax process needs to, we need to tweak and re engineer it a little bit. And, we think this is a good time, given the circumstances. So that’s, kind of how we’re handling this situation. And that’s tried kind of how we’ve handled the situations in the past.
And Bruce, it’s, you know, hearing you talk about that, I think it’s human nature in a lot of ways to self preserve or what’s in my best interest and not sometimes seeing the bigger picture. But also, Bruce, hearing you talk about that, we’re going to sit down and talk through how could we take some of their best practices? Because that’s a big shift too, whenever you do have 1,100 people to make a change at that level. But then again, when you think about that’s a lot of times how innovation or change happens is maybe you see one or two things that we could take from this to improve what we’re doing. So, we’ll have to connect at some point and hear how that’s all going when you talk through that process.
So, Bruce, one of the other things I’ll go back to: You kind of got into the process side and you said, you know, after the announcement, the merger is not over. There’s still, you know, a lot of work to be done there. Can you give us a little insight? We haven’t talked much on the client side yet. What does the client communication look like to make this a win for the client side as well?
So again, we’re very deliberate and intentional with the client communication piece of this. We typically, what we’ll do is, a few days to a week prior to the merger, we will have the partners of that firm that we’re merging in, we will have them contact their best clients and, you know, they’re A clients and we will have them talk through, you know, explain to them, you know, you’re the, I want you to know ahead of time what’s going on, this is why we’re doing the merger. It’s going to bring more resources to you, you’re still going to have the same people servicing your accounts, you’re going to have more resources available to you, we think this is going to make us a better firm and ultimately be able to provide you with the, you know, the best of the best.
And, you know, if they’re a good client, they will typically ask three questions and, you know, is this good for you? You know, will my prices change? And will I still have the same people, you know, servicing me? And you know, the answers are pretty obvious there, right? And, so we rarely, ever have a client say, get upset. It’s, oh, that sounds great. Sounds great to me. I still got you on my account, my prices are staying the same, and you’re surrounding me with resources, and this is ultimately good for you and your career.
So, the second thing we do is we, you know, to the kind of next level clients, we send out an email, the day the merger is announced and let them know what’s going on and, you know, say, let’s, you know, let’s talk it through on the phone, that type of thing. So, you know, again, very intentional, very specific, clients are called, very specific email with follow up phone calls. But that’s ultimately the message to the client. And, you know, I can’t remember the last time we lost a client because of a merger. It just, it doesn’t happen.
Yeah, that’s great, Bruce. And you mentioned in the opening, you’ve experienced good organic growth as well. Whenever you go through that and you have those communications with their clients about the merger, I guess a couple of questions tied to this is, what doors start to open up for those cross serving type opportunities of, you know, taking those additional services, because now we’re part of a different firm. We have some new ideas. You know, how does the firm, I guess, take those ideas and does that open up the doors for those kinds of conversations with your clients?
Yeah, we have a, after the merger and after you let some time pass to, to allow the merging firm to kind of get their feet underneath them, right? But what we’ll do is we’ll start introducing all our new services to the clients and the staff and people of the firm that is going to join us, so we have, you know, we bring our advisory group in and talk about all the different advisory services we bring in. We have a number of different subsidiaries. We’ve been a very entrepreneurial firm. So we have a lot of different subsidiaries that can add significant value to our clients. So we start the whole series, educational series, to make sure that everybody not only understands the resources and the additional services we have, but they get to know the people that will provide those services. And they start to establish relationships with those people, with other professionals or partners in our firm.
You know, the more, it’s human nature, right, the more you develop a relationship with somebody, the more confidence you get in that person, and the more you’re willing to bring them into your clients and introduce them to your clients. So we have a very systematic process where we, whereby we introduce, build relationships and educate one another.
And so in a lot of ways, Bruce, it sounds like you take a very team based approach and it’s a firm client and not my client kind of mindset to open up some of those doors. And my guess is, Bruce, and I don’t know if you have stats around this, but when you do take some of those new services, the more you’re doing for the client, my guess is that they’re probably less likely to leave, once you do start having those and growing those relationships. So, I love hearing that, Bruce. So Bruce, kind of, I guess, final question here, before we wrap up. When we’ve talked about some different areas, we’ve talked about process and communication and what it means to our people and our clients. Is there anything else that maybe I have not addressed yet based on your experience? Is there guidance you would give other firm leaders as they are either, you know, looking at firms or maybe merging into a firm, any final thoughts that you have that maybe we haven’t touched on yet?
You know, I think, again, I think the integration period is the most critical. You know, I think anybody can do a merger, right? And get to the finish line of a final deal. But that integration process, you really have to spend a lot of time with the merged in firm and, you know, it’s easy when they move into your office, it’s not easy when they’re hundreds or, you know, miles away, right? So, having that interaction, having your leadership, you know, in our case, our management committee, we spend a lot of time in other offices, especially the first couple of years when we’re doing a merger, we’re there communicating with them, we’re there listening to them, trying to understand, you know, what’s going well, what are they frustrated about, because no matter how well tuned, your processes, there’s always things that come up.
No merger is going to be perfect. No relationship’s perfect. But if you’re there, if the leadership is there and your partners are making visits to that office, being there, communicating, listening, that goes a long way in working through the bumps in the, you know, kind of the roadblocks of mergers. So, I think that’s important, and we always try to move, permanently move, some of our people into a brand new merged in office. We like to get 10 percent of our people into a new merger. So if we’re opening a new office somewhere and it’s a new merger, you know, we’d like to get a good handful of our people to go in, move there permanently and be those cultural goodwill type ambassadors. So those are a couple of things that I think post-transaction are very important to keep in mind.
Yeah, I mean, Bruce, again, kind of going back to my time in a firm, I think any of the mergers that we went through, any time you were able to do that, of firm leadership, but then also having people that were already ingrained in your culture to be there on site, it just seemed to expedite the process and it seemed to make the experience much better on both ends.
So, Bruce, one thing we like to do as we wrap up, any resource that, I mean, that could be a podcast, it could be a book, whatever it may be, any resources that have really been impactful in your career journey that you would like to share with our listeners?
You know, there’s one book I can think of that’s really been invaluable and it relates very closely to, to the, you know, to kind of the work you do in a merger. And that book is called The SPEED of Trust by Stephen Covey. You know, the whole premise is the time that you invest in building relationships and building that trust is critical. And you know, if the partners and the people of the firm that you’re merging in, if there’s not complete trust, It goes sideways really quick. And, so we spend a lot on all the things that I’ve talked about throughout this podcast, a lot of it is, you know, really working to build that bond or that relationship and that, and building that trust factor. So that was a very helpful book for me.
Bruce, it’s funny you brought that book up. This is actually the second time I’ve heard that book title this week. So it is a classic and it is definitely a good one. And I have to agree with you, Bruce, without trust, it’s hard to get anything done. And I get it too, in our today’s world, that sometimes you feel like, gosh, we’re busier, we don’t have time for that, but I would argue that if you’re not doing some of those things, it’s going to make it a lot more challenging for it to be successful.
For sure. Absolutely.
Well, Bruce, I greatly appreciate the time. I’m glad we were able to have the conversation today and thank you to all of our listeners for continuing to tune in and the ongoing support. Bruce, it was great to see you again. I hope to maybe connect with you again at Headwaters this year. So Bruce. Thank you so much.
Great to see you, Heath. Take care. Have a great day.