M&A and accounting professionals who are deeply entrenched in CPA practice succession know that we are in a buyer's market. Among CPA firms, there are currently many more sellers than buyers, and those buyers have very particular interests and needs. What are the priorities that buyers are justifiably seeking? Here is what we are seeing:
Potential growth rate in client services for the acquired practice of at least 10% more than their own practice.
New profitable services and expertise to offer clients.
Ability to bolster profitability and efficiency of the acquired practice.
Marquee clients to either reinforce or build up the firm's reputation.
Enhanced purchasing power from greater needs and demands.
Market presence in area that will deflate or eliminate the competition.
Access to best practices that will upscale profits and reduce client engagement tensions.
Comfort and track record for collaborative work with outside experts who will perform services that are not within the firm's current platform.
Progressive HR policies that attract and retain talent.
Decisive communicators who will support an ability to process the transaction and who will collaborate efficiently post-merger.
Today's buyers, especially private equity shops, are highly oriented towards data and performance. The days of deals built on a "feels good" formula are long gone; to close a CPA firm M&A transaction in this market, the deal has to look good based on real data and proven results--and prospective buyers need to be confident from the data that the deal will look even better in three years.
Furthermore, conventional buyers are now looking to add non-CPA firms and other types of allied businesses that can expand their service lines and revenue streams. The reality is that buyers understand that M&A is about building a better business and they are taking conditions very seriously.