Key things to consider before merging practices

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For many years the financial services industry has encouraged practices to merge and specialise their activities as a strategy to optimise operational efficiency and respond to industry challenges. The legislative requirements of FoFA and increased expectations of a sophisticated, educated and demanding consumer also contributed to this need for practices to maximise their business activities.

Seaview Consulting directors Bob Neill and David Fotheringham believe that the number of merged practices that will end bitterly in 2013 is set to increase as hastily entered into relationships descend into protracted disputation and ultimately dissolution.

Reasons for leaving practices could range from; a desire to move to greener pastures; retirement; staleness; a partner not meeting KPI’s; loss of trust; hostility; a sudden departure due to family or health reasons; alleged theft or fraud; relocation interstate or overseas; financial stress or external demands.

 “We have witnessed an increase in the number of merged practices deciding to exit the practice partnership arrangement,” said Bob Neill. “This trend can be expected to continue within the financial services industry into the foreseeable future.”

For partners looking to merge practices, clear documentation is a priority, particularly those aspects which cover exit provisions. Ensure they are relevant and provide a clear process for conflict resolution.

The costs in commercial terms when partnership disputes are unable to be resolved are significant and profound:

 Legal costs can skyrocket when the desire to win overtakes common sense

 Commercial value in the business is eroded and often destroyed

 Emotional tolls can be as equally significant as financial costs

 Public airing of personal and commercial matters further erodes the well-being of the business

Do you think practices are merging too hastily?

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