Succession and Growth Drive M&A and Search

Yes, this is the busiest time of the year for CPAs, but I am seeing something a bit different this year. In the past, there was little busy season CPA firm merger and acquisition or high level search activity. This year is different. For the past several years the season has stretched out long and longer, but this year seems even more pronounced.

Based on recent Federal Reserve actions and comments, it seems very clear that the U.S. economy will at least be stable the next few years as rates will stay very low and the greenback printing press active. This bodes well for the general economy and stock market though higher inflation is likely in the cards. This set of circumstances is giving some degree of confidence to CPAs and other business owners.

For the past several weeks, my firm has been in process with several potential buyers and sellers. These buyers and sellers are not just the larger or medium size firms where the managing partner may have the time to devote to this type of strategic activity. These are firms of 5-75 people where all of the partners have significant client responsibilities.

On the search side, we are actively working with some partners currently with well-known mid-sized firms. These individuals will not be leaving their firms during this busiest time of the year, but they are having first and subsequent meetings now with the idea of landing a better opportunity in the spring.

What accounts for these changes?

1. Retirement minded partners, succession issues and a slowing economy. With organic growth so slow, growth through mergers is more pronounced.

2. The merger mania across the country is creating a mindset that wasn’t so present during the last few years.

3. The potential sellers feel the pressure of needing to find the right upstream merger because of the desire for senior partners/founders to retire and quite often these firms have staffing issues that may impinge on client retention.

4. Regarding partners seeking a new opportunity, it’s much the same. Up and coming partners in their 30’s and 40’s are looking ahead and have some issues. Are the most senior partners proactive and progressive about the future of the firm? Are they fair about compensation? The answers that I hear are generally not positive. In most cases, the younger partners have had conversations internally about these issues and feel that nothing will change until it’s a forced issue due to illness or some other external factors. That creates uncertainty for the younger partners and is the reason more are open to conversations.

How are you and your firm reacting to these changes?

If you’d like to discuss this or any other issues related to your practice or career, please don’t hesitate to contact me: My direct line is (212) 490-9700. Or email me rfligel@rf-resources.com. Absolute confidentiality always assured.

- Robert Fligel, CPA