Due to shifting business models, a growing economy, and an aging baby boomer generation preparing for retirement, a significant number of small and mid-sized architecture practices are expected to hit the market over the next few years.

This may seem like great news if your firm is looking to expand operations with a merger or acquisition. But, the sheer number of available opportunities belies the fact that not all of those opportunities are created equal. How do you decide which firm is worth buying or even if buying or merging with another studio is the right move in the first place?

Success for the Few; Failure for the Masses

It is well known that the longevity of mergers and acquisitions between companies across all industries is dismal. Numerous studies set the failure rate of these business arrangements at somewhere between 70% to 90%. What may have seemed like a great match on paper doesn’t always work out in real life. Just like any relationship, without a certain level of chemistry and the sharing of some core mutual values, the chances for long-term– even short-term– success are slim.

That said, this article is not about the legal side of buying another practice. While this is certainly important, and you need to be doing your due diligence, there is another, less tangible side to successfully bringing two practices together.

 

Awareness is Key

Success begins by really getting to know your firm (things like your core mission and value proposition) as well as the practice you want to buy into (Who is running the firm? Who are they as individuals? How do they operate? What does their culture look like? What are their core goals and values?).

You also need to be clear about what your reasons and goals are for acquiring another practice. Often, firms going into an merger or acquisition thinking it’s the easiest next step for growth and expansion. But, their goals could have been better met through some other arrangement, less intensive relationship, such as a joint venture, or the hiring of an outside group of professionals who excel at some core competency, such as marketing.

Success additionally means getting to know a whole bunch of people: the people who are employed in your firm, the people who are employed at the other firm, as well as who these companies are already serving and working with.

Realise that the architecture industry is going through a period of significant transformation and disruption. These shifts are the result of a number of technological, social, and economic factors. (I’ve written about them over here). The fallout of all of this change is that the role of the architect and the studio as a whole is shifting into unknown territory– from project director to project consultant, and in many cases, from a specialist to generalist. Any studio that your firm considers for a merger or acquisition, should help your firm make this transition more easily.

The difference between buying an architecture practice (or any other creative business for that matter) versus other kinds of companies, is that you are not just buying revenue streams, a client base, or hard physical assets. You are also buying a lot of intangibles, such as their approach to the design process, their style, their culture, work ethic and the quality of their relationships. These things are harder to measure, yet they are usually the factors that can make all the difference between success and failure.

The bottom line over here is that a successful merger or acquisition doesn’t usually come easy. It takes a lot of consideration, effort, and resources to make it work. Giving the process what it needs from the beginning will provide your firm with the best chance for success, or at least avoid an arrangement that you’ll come to regret later on.