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Wednesday, 5th August 2020
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The key moments in a merger Back  
David Hargaden discusses the recent merger of Hargaden Moor with BDO Simpson Xavier, and explores the rationale behind the alliance.
Why would you consider merging an accounting and business services firm like Hargaden Moor which, within a period of ten years had become the fifteenth largest in the country, was very successful and had an excellent reputation for professionalism?

In order to answer the question you have to consider the way the services market has changed over the past ten years and more importantly over the past five years. In 1995 Hargaden Moor was superbly positioned to take advantage of the boom in our economy as we had targeted growth orientated companies and entrepreneurial individuals as our clients.

In 1992 when the new partnership team of myself, Ciarán Medlar and Nigel Cox, joined founding partner Michael Hargaden, Hargaden Moor’s business was split along an 80 20 ratio with 80 per cent of our business coming from companies that had invested in Ireland through IDA Ireland. The remaining 20 per cent came from indigenous business. When we merged with BDO Simpson Xavier in 2001, the situation had reversed with 80 per cent of our business coming from indigenous Irish business and 20 per cent from international business. This successful change in the mix of our client base was a direct result of the way we had positioned ourselves from 1995 onwards.

By the end of year 2000 our client list was superb and included the alphyra/ITG Group, Drury Communications, myhome Limited, the countries leading property portal, AOL Time Warner Inc. and the Bertelsmann Group. We consistently exceeded our targets for growth and profitability year on year.

While this successful growth was taking place, one issue began to concern us and it was one which we became very conscious of during 1998. Our clients were increasingly looking for more specialist services from us and in addition they were looking for an international reach. This demand became particularly evident from the more successful Irish owned companies. As we are firm believers that in order to keep growing you have to keep pace with your client growth we have always followed a policy of reinvestment and reinventing ourselves.

In mid-2000, in anticipation of the market consolidation which we believe will continue in the services sector in the coming years, we began to examine our options. A merger with another leading firm was one of those options. However, if we were going to do anything with a firm it would have to be with a firm with a similar ethos and outlook.

The number one candidate was BDO Simpson Xavier. We had already carried out a number of joint assignments on joint clients and were familiar with each other’s approach. Anthuan Xavier and I were finally introduced in March 2001 for an informal conversation about what opportunities might be available if we were to consider merging with BDO Simpson Xavier.

At BDO Simpson Xavier one of the key criteria is whether or not the ‘face fits’. I knew after the meeting with Anthuan Xavier that we could work together as we shared similar views, work ethic and had similar aspirations. It was clear from March 2001 that the game was on. However, putting a merger together is not an easy task. There are a huge range of issues to cover - people, property, location, finances and most importantly assessing how the clients will react. It is also important to ensure as much as possible that the employees of both firms will be satisfied and comfortable with the merger. After an initial round of meetings between the Hargaden Moor partners and BDO Simpson Xavier partners in April and May we decided not to meet during June 2001 so that each side could take a little time to consider their attitude to the potential merger.

Both sides emerged from the break with the same attitude as before June, and we were both prepared to go to the next stage and complete heads of agreement. July and August 2001 were very intense months and we finally reached an outline arrangement which both sides felt was acceptable towards the end of the summer. Heads of agreement were signed at that time.

From early September onwards we went through a very intense period of due diligence and legal agreements with both sides having separate legal representation and nominating partners from each side to keep the process moving. On our side Nigel Cox and Ciarán Medlar and on BDO Simpson Xavier side Jim Donnelly and Ronan King. During this period Anthuan Xavier and I were in constant contact dealing with issues as they arose.

I have to admit that as someone who is normally involved in these sort of transactions for clients it was very unusual to have to do it personally and for my partners and to be unemotional about it. Emotional issues do arise because as a smaller firm we were certainly giving up alot of independence but having managed the emotional side of the merger during the summer we moved with great speed to close down any of the issues. Throughout this period we had many ‘face fitting’ meetings with both sides through a combination of social and business interaction. During this period we learnt alot about BDO Simpson Xavier and surprisingly learnt alot about our own practice in that we realised how good a practice we were and how well it came out of an assessment carried out on it by BDO Simpson Xavier.

At all times the issue that most concerned us was at what stage do we inform our employees and at what stage do we mention the merger to our clients. It is very difficult to get the timing right on both issues and as the Dublin business community is small we were aware that a number of our own people had heard rumours of a possible merger.

We finally announced the merger internally in early October 2001 and then during the rest of that month we briefed as many of our clients as we possibly could. The legal agreement was signed towards the end of October and announced on October 25th.

The process of putting the merger together is only half the story. The real work starts when the merger starts and both sides have put in place a programme of events and have also appointed a professional facilitator to manage the after merger process. This is ongoing and to date has been extremely successful and helpful.

Like any good business, the success of this merger depends on the people. Good people are very difficult to find. We would not have made the move without assessing each others talent and assessing whether the enlarged firm would have the capability of delivering on the new business plan for the merged firm. I am happy that we can deliver.

Going back to my original question, the answer is the new challenge after ten years of being independent, the ability to keep pace with our clients, the ability to have an international reach on behalf of our clients and most importantly the personal challenge and goal of doing it all again but on a much bigger stage.

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