Do publicly owned professional service firms mimic partnership votes for mergers and acquisitions?

What is it about?

Large accounting and law firms have traditionally been structures as partnerships with ownership restricted to professionals, unlimited liability for the action of firm partners and partnership voting for major firm strategic decisions. It has been argued that partnership motivates professionals and partners to share client and technical knowledge, to practice self and peer control and aligns the interests of professionals and clients. However recent regulatory changes have seen the emergence of incorporated and limited liability law and accounting partnerships (LLPs) which remove the unlimited liability and more recently publicly owned accounting and law corporations that eliminate restrictions of ownership. This paper explores whether it is how firms are governed rather than ownership form which is important for managing professionals. The study explores the acquisition processes of two highly acquisitive publicly owned accounting companies to examine the input, if any, professionals have on acquisition decisions and the potential impact on decision quality and firm performance. Senior professional input was found to increase the rigour and quality of acquisition decisions and senior professional commitment to acquired firms.

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Why is it important?

Partnership has been assumed to be a superior ownership form for managing professionals, however the emergence of other ownership forms even in traditional professions, such as accounting and law, raises doubts as to the assumed benefits of partnership. This is one of the first studies to examine recently emerged publicly owned firms to explore whether it is how firms are managed, rather than ownership form, which is important. The study suggests that the input of senior professionals with knowledge of the acquired firms and those that are expected to interact with acquired firm professionals post acquisition may be important to professional service firm mergers and acquisitions. The research may provide insights for partnerships that are heading down the commercial management path that there may be limits on the centralisation of management authority.