{"id":95220,"date":"2022-03-11t12:00:54","date_gmt":"2022-03-11t17:00:54","guid":{"rendered":"\/\/www.g005e.com\/?p=95220"},"modified":"2022-12-22t00:40:35","modified_gmt":"2022-12-22t05:40:35","slug":"why-do-you-want-to-merge-be-honest","status":"publish","type":"post","link":"\/\/www.g005e.com\/2022\/03\/11\/why-do-you-want-to-merge-be-honest\/","title":{"rendered":"why do you want to merge? be honest."},"content":{"rendered":"

\"\"<\/a>then we can talk about how.<\/strong><\/p>\n

by marc rosenberg<\/i>
\ncpa firm mergers: your complete guide<\/i><\/a><\/p>\n

whether you\u2019re looking to acquire a smaller firm, merge upward into a larger one or join forces with an equal, answering this basic question honestly and objectively is key to laying the groundwork for a successful merger.<\/p>\n

more: <\/b>four reasons to fear a merger<\/a>
\n\"goprocpa.com\"exclusively for pro members. <\/span><\/strong>log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/p><\/blockquote>\n

the table below lists the main reasons that firms seek mergers. some of them benefit both buyer and seller. others provide the greatest advantage to one firm or the other, depending on the unique situation.
\n
\nonce you\u2019ve determined your firm\u2019s motivations for testing the merger waters, you can create a merger strategy that best fulfills your firm\u2019s needs.<\/p>\n

state of the cpa firm merger market<\/h3>\n

with 80 percent of first-generation firms never advancing to a second generation of owners, it\u2019s no wonder that merger mania continues unabated. each year, the cpa industry experiences a large number of mergers and an even larger number of merger opportunities.<\/p>\n

why firms merge<\/strong><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
main reason for <\/strong>seeking <\/strong>the merger<\/strong><\/td>\ndownward <\/strong>merger <\/strong>(buyer\u2019s perspective)<\/strong><\/td>\nupward <\/strong>merger <\/strong>(seller\u2019s perspective)<\/strong><\/td>\n<\/tr>\n
1. make more money<\/td>\nx<\/td>\nx<\/td>\n<\/tr>\n
2. create exit strategy<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
3. acquire talent<\/td>\nx<\/td>\n<\/td>\n<\/tr>\n
4. gain access to talent, recruiting advantages<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
5. add a specialty<\/td>\nx<\/td>\n<\/td>\n<\/tr>\n
6. eliminate admin headaches<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
7. buy market share<\/td>\nx<\/td>\n<\/td>\n<\/tr>\n
8. bigger firms attract bigger clients<\/td>\nx<\/td>\nx<\/td>\n<\/tr>\n
9. create synergy<\/td>\nx<\/td>\nx<\/td>\n<\/tr>\n
10. being part of a bigger firm makes \u201cbig firm things\u201d more affordable<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
11. provide greater diversity of services; more things to sell<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
12. find common niches<\/td>\nx<\/td>\nx<\/td>\n<\/tr>\n
13. take advantage of larger firm\u2019s infrastructure and resources<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n
14. avoid overreliance on one market or a large client<\/td>\n<\/td>\nx<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/u><\/p>\n

\u201cmerger mania\u201d is particularly prevalent among the top 100 firms in the largest 75 markets in the u.s. and canada, mainly because (a) larger firms have more resources to devote to merger activities and (b) the top 100 firms generally have a lot more to offer sellers than smaller buyers do.<\/p>\n

sellers, however, tend to be hesitant to make a move. on the one hand, their intuition tells them that they really have little choice but to merge up as an exit strategy. on the other hand, they fear that the life they have known and loved for 30 years or more will cease to exist once they merge with a larger firm.<\/p>\n

the result is sort of a merger paralysis. hesitant sellers have a hard time understanding this: if you, as the seller, have been successful for many years and don\u2019t have any skeletons in the closet, you have little cause for alarm. buyers have little interest in spending the time and effort to \u201cfix\u201d a successful small firm that isn\u2019t broken.<\/p>\n

here\u2019s what\u2019s going on in the cpa firm merger market:<\/p>\n

    \n
  1. it\u2019s frenetic, <\/strong>fueled by baby boomer retirements and buyers\u2019 voracious appetite for growth. buyers are flooded with opportunities. most buyers are evaluating multiple deals at any given time, so \u2026<\/li>\n
  2. buyers are more selective\/strategic than ever before.<\/strong> more and more, buyers are looking for sellers that will be a good strategic fit. great staff with partner potential. specialties. new location. synergies. buyers have raised the bar for who they will look at. some sellers will be lucky to get a deal at anything close to a traditional price.<\/li>\n
  3. large metro markets are somewhat picked over, and the universe of buyers in some cities has been depleted because of upward mergers. <\/strong>active buyers have talked to virtually all the players, or at least know who they are interested in and who they are not interested in \u2026<\/li>\n
  4. but \u201cno\u201d means \u201cnot yet.\u201d <\/strong>things change. sellers who wouldn\u2019t consider an upward merger a few years ago often change their mind. buyers must be persistent if they have their eyes on a target.<\/li>\n
  5. staff is critically important to buyers.<\/strong> many buyers feel staff is just as important as the clients. an overdependence on aging partners turns off buyers.<\/li>\n
  6. sales multiples are coming down,<\/strong> more as a reluctance to go above 1x fees rather than reductions below 1x. many large regionals are paying as little as 60-70 percent. however, we recently heard that in some markets the multiple is going up to 115-120 percent.<\/li>\n
  7. larger and smaller buyers have differing strategies.<\/strong> larger firms are more willing to acquire a firm for its potential. small buyers want a return in the near term, and to get it, may push hard for a large compensation haircut to sellers.<\/li>\n
  8. many buyers want a business<\/em> client base, not a 1040\/write-up practice<\/strong>. a heavy concentration of low-value, high-volume, standalone 1040s is a big turnoff to many buyers.<\/li>\n
  9. wealth management<\/strong> is increasingly important to buyers in selecting sellers.<\/li>\n
  10. buyers want sellers with clients that will grow with<\/em> them.
    \n<\/em><\/strong><\/li>\n
  11. consulting.<\/strong> more and more buyers, especially top 100 firms, are acquiring consulting firms instead of or in addition to cpa firms.<\/li>\n
  12. working past age 65-67.<\/strong> the longer the seller wants to work past \u201cnormal\u201d retirement age, the more of a turnoff this is to buyers. many don\u2019t want \u201cold guys hanging around.\u201d<\/li>\n
  13. buyers have a revenue per partner threshold. <\/strong>many top 100 firms have rules of thumb for how many of the seller\u2019s partners will become partners of the buyer. they generally look to maintain an average of $1.5 million or more of revenues per partner.<\/li>\n
  14. partners are participating in buyers\u2019 retirement plan. <\/strong>in a merger where partners continue working for many years, they often receive the value of their practice by participating in the larger firm\u2019s retirement plan instead of getting bought out when joining the larger firm.<\/li>\n
  15. deals often take longer<\/strong> to negotiate because of sellers<\/strong> struggling with pulling the merger trigger, buyers having so much to choose from and buyers being pickier. if both buyer and seller are below $10 million, they are superbusy with their clients and struggle to find time to negotiate.<\/li>\n
  16. down payments<\/strong> are generally frowned on by buyers.<\/li>\n
  17. deals are almost always done on collections,<\/strong> not billings.<\/li>\n
  18. two-stage deals,<\/strong> in which the seller wants to keep working for a few years but have the buyout agreed on at closing, have become increasingly more popular.<\/li>\n
  19. buyers and sellers need to be aware of how the math works.<\/strong><\/li>\n<\/ol>\n