Buying a CPA firm Q&A: What if the accounting practice period gets delayed?


Speaker 1: What if the transition over the transition period is being pushed to one year, instead of a longer time frame because of health reasons or we’ll say reasons like that then cause it, is that just not a good deal to then pursue? Is there other ways to then de-risk it, I guess there’s some creative problem solving and deal structuring that can go on there, but what sort of questions have to come up if someone’s trying to push for a faster, for whatever reason, buy out period?

Speaker 2: Yeah, well I was going to say I’m all for fast closings because in my estimation time kills all deals, okay, if you have to wait too long. Do you understand?

Speaker 1: Yeah, that makes perfect sense.

Speaker 2: I was going to say I lost you there for a second.

Speaker 1: No, no, no, no. You’re saying time kills the deal but at the same time I imagine there’s a bit of anxiety of saying “Oh my goodness, I don’t want to close too quickly. I want to make sure this is a good fit.” They’re saying we can only do a year. I imagine that then adjusts maybe the pay out, maybe the multiple then changes because of that as well and I imagine then it’s a matter of reviewing that.

Speaker 2:
No absolutely the multiple would change, you know, and again it’s on a case by case basis and we haven’t run into the health issue too much, but I’m sure it’s certainly a viable thing that happens, I am sure, but yeah, you would have to structure it so that your client retention and your multiple would be fair to both parties. We like to say a good deal is fair deal, so you’re not going to pay an outrageous multiple if you only have a one year client retention, it’s just not going to happen. You got to remember though making the decision to merge is often the last and most important business decision many of these small firm owners are going to make in their entire lives, all right? It’s, you know, people sort of chuckle when I tell them that sometimes it’s easier to merge a $15 million firm than it is to merge a $400,000 firm, and the reason being is a $15 million firm it’s a financial decision, whereas the $400,000 firm, maybe some man or woman has nurtured this for 20 years, it’s so emotional, and they’ve got one foot on the dock, one foot on the boat, they can’t seem to make a decision.

That’s why sometimes we prefer to enter into the larger mergers because it’s based on financial rather than emotional.

Related Articles:

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  2. Communication conflict between CPA and Accounting Firm
  3. Hiring and Managing CPA Part Timers in an Accounting Firm


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