Five Factors for the Successful Buyer

by Ira S. Rosenbloom | May 17, 2016
People shaking hands
The number of firms in merger and acquisition (M&A) conversations is growing at an accelerated pace with no signs of slowing. In fact, the AICPA predicts that in less than 10 years, 75 percent of all current accounting firm partners will be retired. Succession planning and the quest for market share growth are two of several factors that are fueling the M&A momentum. Those interested in being a successor may see more overall competition than imagined, and more of an analytical type of competition as well.

Here are five critical factors to best position your company as the champion suitor.

Clarity of Vision

Defining what the combined firm will be and what it will look like is essential to guiding the process, much like the rendering for a construction project. The more operational details that you include and the more compelling picture that you paint, the better chance you’ll have of getting the deal. Focus on the company brand, its deliverables, pricing, market presence, human resources, scheduling, work flow, billing and collections, service modules, and client-retention methods.

As the buyer, you need to do some critical long-term planning before even stepping up to the negotiating table. Some of the most important components for you to consider include your client base, fee structure, employees, and the number of billable hours that you’ll need to execute your company’s vision. Do not underestimate the importance of your own office culture when contemplating a merger. What’s the ideal size and scope of your firm, and how would an acquisition fit into this goal? All of these factors should be integrated into your business plan. Once you have developed a roadmap for longevity, you can begin to determine which type of sellers fit into this vision.

Company Strategy and Motivation

Establishing prioritized goals and being disciplined about them is significant. The more closely aligned your goals are with the seller’s, the better potential you have for a successful deal. Common priorities for a buyer would be increasing talent, creating or intensifying a niche, marketplace positioning, enhancing profitability, offering new services, improving client demographics, and strengthening appeal to potential new hires. Focus on the details of what you’re trying to achieve and how a particular acquisition might fulfill that. For example, if your firm already has a good reputation for servicing a particular sector and you want to continue growth in that area or expand into a parallel sector, then it makes sense to target practices that would accomplish that. Another strategy might be taking your firm’s established knowledge base and expanding it into a specific geography to help you sustain long-term growth. The more excited the seller is with your strategy the better the odds for a deal.


If yours is a multipartner firm, being united in your goals and interests is vital. Without that unity, it will likely take longer to close a deal, if at all. A seller may even downgrade your firm as an option or raise the ante to finalize the transaction. In many cases, attitude will lead to concessions that otherwise would not be possible. Consistent focus on, and communication of, the deal’s benefits will help intensify interest and keep the partners on the same page. Differences in succession planning goals, or lack thereof, can kill a possible sale before it even gets to the negotiating stage. Each partner in the firm will likely have his own succession plan and timing, so it’s best to understand what those are at the onset.

When a sole practitioner is the buyer, confidence and humility are essential. Learning and gaining expertise go a long way in motivating a seller when negotiating with a solo practitioner. Staging the deal, or allowing for phases that build toward an agreed end date/full merger or sale, may carry clout as well.

Capacity for Expansion

Sellers want to know that their successors have the skills and personnel to both handle their clients and protect their staff. It is critical to carefully evaluate your firm’s staffing capacity and how it will handle the potential new workload. Experience has shown that when merging accounting firms have transitioned effectively, an overwhelming majority of acquired clients, typically 90 percent, remain with the new practice. That will be a significant increase in client accounts, so if your firm is already at capacity this could be overwhelming. Think seriously about your own firm’s current capacity to manage that and how your staffing may need to change to fulfill it. If your staff already has a full workload, splitting the new client accounts amongst existing staff is probably unrealistic. Unemployment is currently very low in the accounting field, so be prepared for the amount of time it will take to recruit the right employees.

Comfort with Compromise

The best buyers recognize that one-sided deals are unlikely to prevail. Furthermore, deals that require too much compromise are just as unlikely. Buyers need to know what their “line in the sand” issues are, prioritizing their most important items and making adjustments on less important issues. When working through a compromise, conversation is critical both internally and externally. The more that issues are discussed and not merely dismissed – clarified and not argued – the greater the propensity for a successful outcome. If you can’t reach a compromise in a reasonable amount of time, try moving on to a different issue or bringing in an outside mediator. In most transactions, it is assumed that a certain level of negotiation and compromise will take place, especially once the larger pieces are in place.  A smart buyer will keep the long-term vision at the forefront of the M&A negotiation and not get sidetracked by short-term factors that may look good on paper but won’t help fulfill that vision.
Of course, price and purchasing terms are always important factors that impact a final sale, but rarely do these two elements derail a merger. Differences in company culture, long-term goals, and partner succession are more likely to be deal-breakers. Savvy buyers will treat M&A like a line of business, and they will analyze every factor that could affect the success of their practice. Time spent exercising due diligence now and incorporating that analysis into the business plan will best prepare buyers for making the most advantageous match possible.

Ira S. Rosenbloom, CPA, is chief operating executive at Optimum Strategies LLC in Spring House, Pennsylvania.

Reprinted with permission from the Pennsylvania CPA Journal, a publication of the Pennsylvania Institute of Certified Public Accountants.

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