the math might surprise you.
by marc rosenberg
cpa firm mergers: your complete guide
partners in accounting firms are familiar with the rule of thumb that a cpa firm’s goodwill is worth one times fees; however, like many “rules of thumb,” this notion is often incorrect.
when buyers begin to think about how much they will pay for a smaller firm, they often have this one-times-fees notion in the back of their minds. then, when sellers are bold enough to ask for a price in excess of one times fees, buyers often balk because they feel that the asking price is too rich.
more on mergers: the merger process in 21 steps | plant seeds to turn up merger candidates | looking to grow your firm? how to find a seller in four steps | 13 ways to screw up a merger | 15 can’t-skip merger terms to decide | 14 keys to a successful merger | 13 reasons accounting firms merge | mergers 101: when negotiations aren’t really negotiations | 5 steps to take before merging
the purpose of this chapter is to demonstrate that buying a small firm for one times fees is a steal (for the buyer). in fact, it’s still an outstanding investment at a premium price, say, as high as 1.3 times fees. let me illustrate.
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