According to some observers, it is still a seller’s market for CPA firms because potential selling firms are waiting—perhaps too long. Sellers are apprehensive about changes in their professional lives. But, according to Marc Rosenberg of The Rosenberg Associates in Wilmette, Illinois, a buyer’s market will emerge in the next five to 10 years. The reason—partners in selling firms are aging and will not be able to wait any longer.

Smaller firms are often poor at succession planning. This is compounded by the shortage of young people to assume responsibility for both knowledge of niche areas, and management and leadership. This also means a shortage of young partners to buy out older partners’ interests.

Because so many firms are looking to mergers – both upward and downward – to cure the talent shortage, some observers believe there is neither a buyer’s nor a seller’s market now.

Joel Sinkin and Terrence Putney of Accounting Transition Advisors in New York and Overland Park, Kansas, provide this analysis of the M&A market:

• In large metropolitan areas it is still a seller’s market for firms under $1 million.
• In smaller markets it is a buyer’s market for smaller firms.
• In all locations it is a buyer’s market for firms in the $3 to $8 million range.
• Because mid-sized firms have clients that need more varied services, these firms seek upward mergers.
• The majority of buyers are one-to-four-partner firms that view acquisition as a faster way to grow.

Allan Koltin of PDI Global in Chicago says 84 percent of firms in merger discussions never consummate the transactions. Reasons for this include:

• They can’t agree on the new name.
• They can’t agree on how to govern the new firm.
• Cultures are incompatible.
• Egos are too big.
• There’s always someone to say no.
• When the realities become apparent, disillusionment results.
• Compensation systems are incompatible.
• Risk is seen as too high.
• They can’t agree on terms.

From Accounting Today, January 30, 2006. For the complete article, click on the following link: http://www.webcpa.com/article.cfm?articleid=18627&;pg=acctoday.