Mergers | Business

Sales and Mergers | Business Owners | How do You Find the "Best Buyers"?

Finding the best buyer or merger for your accounting business is done by analyzing each critical variable.

Selling or merging your accounting practice can be a big step at any stage in your career. Whether you've been assisting clients for several years and own a large firm or you're a single CPA with less than five years under your belt who is considering a merger with a highly structured business, it's essential to receive a multiple reflecting your hard work and effort.

Before you enter any negotiations, it can help to understand the variables a buyer will examine to help determine a multiple both of you will find appealing.

Finding the best type of buyer who will reasonably perform pre-acquisition due-diligence is crucial. Merging or selling your accounting business to the best buyer involves evaluating critical variables, such as client retention, profitability, specialties, size, and the length of the payout period.

Client Retention is Important

Examining client retention is one of the top variables used when determining a fair multiple for your accounting firm. Purchasing a practice always presents the risk of clients leaving after completing a deal. Handling this possibility is typically done by implementing a set of installment payments. Valuing your business by incorporating this method into the final contract is a fair way to ensure both you and a buyer are protected.

If your firm gets acquired with this type of plan in place, you should expect a decrease in an installment payment if the client retention rate drops. However, you might receive a higher payment if you help facilitate an increase in clients. Discussing these options during the pre-acquisition due-diligence phase will typically help clarify the terms of the sale.

Profiting From Your Sale or Merger

Receiving the highest multiple for your practice is always a top goal to have as a seller. Still, it's also essential to understand the viewpoint and financial position of a buyer. While you may have consistently generated profits and met your financial goals yearly, the costs incurred by a buyer when acquiring your CPA firm must be determined to come up with a fair multiple.

If you merge your business with Fusion CPA and we can perform a transition with little to no increase in overhead expenses, it may help increase the multiple for the deal and present an excellent opportunity for you to consider.

Considering Specialties

Receiving as much money as possible in an initial down payment is always attractive. Negotiating this factor will likely include the consideration of the time of year and any specialties you might have. If your firm is focused on providing specific services, such as tax planning, you may receive more revenue during particular times of the year, which will require examination.

Size

The size of your practice will also come into play if you are contemplating a merge with Fusion CPA. Having a small accounting firm can be beneficial as transitioning this type of business is typically less complicated due to fewer staff members. Merging your existing list of clients should be easy and straightforward.

Determining a fair multiple for a large firm will usually take more time but can be done by utilizing a streamlined pricing and payment structure to help ensure that the value of your practice is maximized.

Determining a Fair Payout Period

Completing a merge with Fusion CPA as a large firm will likely extend out the period of installment payments you'll receive. Analyzing the amount of cash flow that might be generated plays a significant role in determining this variable. Accepting a more extended payout period will probably decrease the amount of each payment as this helps increase annual cash flow from the merger. The upside of this type of structure is the possibility of receiving a multiple that's higher than average.

Analyzing all of these variables is essential as they are all interrelated. Examining each one should help you find the best buyer or merger for your business with a fair multiple.

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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.

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