The math might surprise you.
By Marc Rosenberg
CPA Firm Mergers: Your Complete Guide
Partners in accounting firms are familiar with the rule of thumb that a CPA firm’s goodwill is worth one times fees; however, like many “rules of thumb,” this notion is often incorrect.
When buyers begin to think about how much they will pay for a smaller firm, they often have this one-times-fees notion in the back of their minds. Then, when sellers are bold enough to ask for a price in excess of one times fees, buyers often balk because they feel that the asking price is too rich.
MORE ON MERGERS: The Merger Process in 21 Steps | Plant Seeds to Turn Up Merger Candidates | Looking to Grow Your Firm? How to Find a Seller in Four Steps | 13 Ways to Screw Up a Merger | 15 Can’t-Skip Merger Terms to Decide | 14 Keys to a Successful Merger | 13 Reasons Accounting Firms Merge | Mergers 101: When Negotiations Aren’t Really Negotiations | 5 Steps to Take Before Merging
The purpose of this chapter is to demonstrate that buying a small firm for one times fees is a steal (for the buyer). In fact, it’s still an outstanding investment at a premium price, say, as high as 1.3 times fees. Let me illustrate.
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