CPAs take stock of a sellers' market for firms.
by Rick Telberg
At Large
The feedback from my series of reports on CPA-firm mergers-and-acquisitions has been overwhelming.
I've heard directly from over a thousand CPAs so far. Most agree on a few fundamentals:
1. It's a sellers' market.
2. The average sales price runs between 1.0- and 1.25-times annual revenues, with the best deals structured over three to five years as the seller bows out.
3. There are still more opportunities than a single CPA, or small CPA firm, can handle alone.
4. The imbalance between buyers and sellers won't last forever.
Here's a look into the mailbag:
"I believe there is an abundance of potential sellers in the marketplace who have not adequately planned for their firm's succession. Buyers in their 40s with energy and a commitment to adapting to market changes have an excellent opportunity to positively position themselves."
--Erich Rail
Pasadena, Calif.
On the other hand....
"Why should you be so vociferously in the ring attempting to hustle CPAs in their 50s to sell their 35-year-old accounting practices. Life expectancies are now nearing 80 years of age leaving boomers with 30-odd years of life left. If they sell their practices at roughly their gross annual billings they can't manage to call that a retirement trove. So, only those well-heeled (and it is a mistake to feel that all accountants are so well-planned that they could retire without the value of their practice) could survive without their practice incomes for 30 more years. Why all this rush to the registers with the accounting practices? Sage older accountants are wise enough to know that they can hire younger accountants to turn out production accounting, have a place to read the Wall Street Journal and work about four hours a day while commanding all of the respect in their community that they ever did."
---JDFCPA
"I have been reading your articles with great interest since I am a CPA that brokers the sale and merger of CPA firms. I agree that it is a seller's market and this year has been much more active than the past several years. I don't necessarily agree with your numbers. Although that differs based on geographic areas. In California, I seem to have 6-10 (maybe more) very qualified buyers for every good practice to sell. The not so good ones may only have 2-4 buyers, usually those frustrated with looking at the good practices, and not getting them. I also agree that this window will not be open forever. I suspect it will remain a seller's market for a number of years since CPA's tend be less prepared for their own retirement. (The cobbler's kid goes without shoes syndrome)."
-- John R. Ezell, CPA
ProHorizons (formerly Professional Accounting Sales of California, Inc.)
"There are many great opportunities for CPAs. We see many possibilities for expansion, but being a small firm with limited resources and time, its extremely difficulty to decide which is the wise choice. We are working on a plan to identify alternatives, select the best for us, and increase skills step by step over time. The information overload in almost overwhelming."
-- G. Craig Potter
Houston
"If we don't start training more newbies, we shall have no one to sell to."
-- Cynthia Ellis, CPA
McAllen, Texas
