Accounting Firm Merger Study

A recent study conducted by CPA Leadership Institute surveyed accounting firms that have been involved in a merger. Whether your firm is considering a merger to grow and strengthen your business or plan for succession, this study will provide valuable insight based on real data.

The study addresses several critical merger issues:

• Purchase price, as a percent of annual gross revenue.
• Duration of the pay out period.
• Length of client retention, which can affect purchase price.
• Cash paid at closing, as a percentage of purchase price.

As well as, some post-merger consequences:

• Principal reason for loss of clients.
• Effect of merger on acquired firm offices.
• Effect of merger on acquired firms partners and staff.

The results of the study were divided into two time periods. The current time period covers mergers that occurred between 1/1/2007 and 3/31/2008 while the mergers covered in the period referred to as past mergers includes the time period between 1/1/2000 and 12/31/2006.

The excerpt from Table 1 below demonstrates several notable items:

• For past mergers 50 percent of the transactions were priced at 100 percent of gross revenue while for the current time period transactions priced at 100 percent of gross revenue declined significantly to 29 percent. For the current period the transactions priced below 100 percent increased from 25 percent to 36 percent.
   

• For the both current and past mergers the percentage of cash paid at closing remained relatively steady with 69 percent and 66 percent respectively paying zero percentage of the purchase price at closing.
   

• Another notable result is that the duration of the payout period seems to be increasing. In the earlier period 31 percent were at 6 years or more. During the later period 53 percent were at 6 years or more.

Click here to read the entire study.

Additionally, the results of the merger study have been differentiated by gross revenue of the firm acquiring and then separately by the gross revenue of the firm that was acquired (revenue categories consider gross revenue of each firm prior to affiliation).

To view complete results by revenue category click here.