Merger Trends

Source: Inside Public Accounting

According to Joel Sinkin of Accounting Transition Advisors in New York, New York, the initiative for mergers has shifted from large firms to small firms. Small firms are seeking up-stream mergers. These firms, facing a dearth of talent, see up-stream merger as the only solution to their succession problems.

The principal motivation for buyers? Obtaining people. If a partner in a selling firm wants to retire, the deal will no longer be as easy to get done as it might have been five or 10 years ago.

There are three categories of mergers:

• One- to three-person sellers in metropolitan areas. These firms enjoy a seller’s market. But firms not in metropolitan areas won’t have it easy.
• $1 million to $5 million sellers. They’ll find it’s a buyer’s market.
• Large firms. Small firms see them as the solution to their problems. The degree of their interest will be dependent on how much special expertise they have in areas like business valuation, estate planning, etc.

For many firms, up-stream merger may be the only solution to the succession problem, and this trend won’t abate.

Key for small firms is planning far in advance of partner retirement. Clients must become loyal to the firm, not the partners. Otherwise marketability of the firm will be very low. Firms that will be most severely affected are those with four to eight partners with no one to assume the leadership roles.

From Inside Public Accounting, December 2007, p. 6., The Platt Consulting Group (www.plattgroupllc.com). Subscription $379 per year; back issues—nonsubscribers $50. 317-733-1920.

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