current trends: demand and prices remain strong
few people have been brokering mergers and acquisitions of accounting firms for as long as leon w. faris (pictured) at atlanta-based professional accounting sales. he’s been doing it since 1983. so we asked…
q: how’s the market for firm mergers today?
faris: the cpa firm merger-acquisition market appears to be holding up well. there continues to be strong demand for the smaller firms, those grossing less than $1 million in annual fees. obviously, things slow down considerably during “tax season” and begin to recover after the march 15th corporate filing deadline.
q: how are small firms faring?
faris: we are seeing a stronger demand from smaller firms to merge with other firms. these owners appear to be overworked and overwhelmed due to a lack of adequate staffing to handle the increased workloads.
q: how are price trends?
faris: prices are holding steady. they are actually up in some markets such as major metro areas and desirable areas of the sunbelt. holding around 1.25 times annual gross revenue. some practices in south florida selling around 1.35 to 1.45 times annual gross fees. rural areas still bringing only 1 times revenue, if a buyer is available, unless located near a major market. still seeing first year adjustments based on client retention. our lenders are much more aggressive. it seems that their real estate market has gone away and they have more funds available. rates running around 1.75 to 2.25 above prime. most are sba lenders, but we do have a very aggressive conventional lender as well.
q: what are the top considerations when looking to buy?
faris: if you are looking to buy, the top 3 things to consider are:
1. location. major metro area, strong side of town, high income area, strong population growth in the area.
2. clientele. type of work being performed, and the type of clients such as high income professionals, small business owners. no retirees, and no low-income individual tax work. how long have these clients been around and will they stay?
3. infrastructure. well staffed firm with quality employees who are experienced and who have been with the firm with little turnover.
q: and if you’re looking to sell?
faris: if you are looking to sell, the top things you want to consider are:
1. market. how strong is your market? is there a demand for practices in the area and for your particular practice. how to price the practice in your market. use a professional. don’t go it alone. you leave too much on the table when you do.
2. financing. be realistic regarding your expectations of being paid in full at closing. brokers have a long list of lenders who will finance the sale. keep owner financing to a minimum. you are not in the lending business.
3. transition. understand beforehand how much time you are willing to make available to the new owner for transitioning the practice from seller to buyer, and will you, as a seller, be compensated for this time.