The Merger Picture in a Bad Economy

Source: Accounting Transition Advisors

In these troubled times, what is the outlook for mergers of accounting firms? Firms are experiencing collection problems, client attrition, reduced fees, and declining business development. However there are some positive things to consider:

• Many potential sellers are more motivated now due to the uncertainty of the economy in the next few years.
• Transaction structures are key. Keep the deal based on collections for the whole payout period or at least have a long enough retention period to properly transition the client base to you.
• History tells us we may soon see a slight increase in the value of firms. It happened in the early ’90s and again after 9/11. Values have been dropping the past two years, leaving acquiring firms in the position now of buying low, but you can’t guarantee the market will stay that way.
• Take a second look at declined deals. Opportunity may exist in deals that you previously declined.

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From Accounting Transition Advisors, www.transitionadvisors.com, December 3, 2008.