CPA Firm Mergers & Acquisitions: How to Buy a Firm, How to Sell a Firm, and How to Make the Best Deal
Chances are you’re looking to buy, sell, or merge your CPA firm. Owners at firms of all sizes are seeking solutions to fund retirements or grow their practices. And, CPA firm M&A activity is only going to increase in the coming years—new deals are announced almost daily.
Fortunately, there are steps you can take right now to position you and your firm for success. Written with both buyers and sellers in mind, this comprehensive resource aims to ensure that both parties to a transaction achieve their goals.
Authors and transition experts Joel Sinkin and Terrence Putney demonstrate that it is possible to arrive at a reasonable deal where retiring partners are paid a satisfying price for the practice they’ve built, remaining partners make more than they did before, and new owners take on a practice that is poised for continuing success and potential growth.
Sinkin and Putney share their best advice on how to:
- Determine your firm’s value,
- Get to know your potential partner in a deal,
- Select a successor your clients will love,
- Structure alternative deals,
- Avoid roadblocks,
- Prepare a practice continuation agreement,
- Perform due diligence,
- Execute a win-win deal, and
- Time and plan for your transition.
Each chapter concludes with an Action Agenda to help spur your planning. Plus, it includes a collection of practical tools to assist you through the process of buying, selling, or merging, including practice summary tools, an annual succession planning checklist, sample practice continuation agreement, sample client announcements, due diligence tools, and sample transition letters.
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Think about the Four Cs
When building your transition plan, it’s fairly easy to recognize skill sets and experience that must be replaced, but we also place a lot of emphasis on what we call the 4 Cs. Both buyers and sellers should be aware of their potential impact on any deal.
If you do not want to eat lunch with the person or people with whom you are considering affiliating, don’t affiliate with them. This is the single most critical advice we give anyone. It is particularly important in an external succession, but even in an internal succession the incoming and outgoing people should like each other.
If you and other partners or even staff will be slowing down in the near future, does the successor firm have the capacity to take on the work load of the professional slowing down as well as the expertise to replace their role? If they don’t have the full capacity in place, do they have a credible plan and a commitment to acquire it? For instance, if someone in your firm who must be replaced is a major producer of billable hours, the acquiring firm would have to be overstaffed (not a good indication of a well-run firm) to replace those hours without hiring anyone. Does the firm appear to have the systems in place to hire people when needed? Who will be taking over managing your clients? The acquiring firm should at least have a plan for that important role and a commitment you can rely on to execute it. The plan could involve promoting a manager to partner to create more partner-level capacity or, if special expertise is required, hiring someone from the outside.
A firm’s culture is central to how it defines itself, but there are many ways to do that. The term generally refers to the firm’s environment and philosophy. When some firms think about “culture,” they are talking about how clients are serviced, billed, or communicated with. In other cases, it is about what might be called client ownership, and whether the firm has an “eat what you kill” or book-of-business mentality as compared to a one-firm philosophy. In other cases, it means having either an open or closed compensation program for partners. Some firms define themselves by their work-life integration policies or their use of cutting edge technologies. No matter what definitions are used, it can be tough to merge two conflicting cultures or ones that have little in common and little interest in change. If that can’t be achieved, once again the practice is risking client or staff losses.
Change is challenging for anyone going through a merger or acquisition. Partners, staff and clients traditionally seek to avoid it. Keep in mind that if your clients have stuck with you, they apparently like the way you are servicing them or they would have complained and gone elsewhere. If your successor requires wholesale changes that will be visible to or have an impact on clients, there may be immediate client defections.
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