What's Happening in M&A?

Source: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog entry by Marc Rosenberg.

Terry Putney is president of Transition Advisors, a company that consults with CPA firms on mergers and acquisitions. This is the first of a two-part series on the highlights of Putney's presentation to two of my Chicago-area managing partner roundtable groups.

Down payments. Sellers are keen on getting as large a down payment as they can possibly extract from buyers. But pressuring the buyer for a sizeable down payment may be misguided.

“Must-haves.” These are merger terms that the seller feels he/she must have in order to do the deal. The more “must-haves” a seller has, the more likely it is to scare off viable buyers.

Gaps in billing rates. This is overblown by both buyers and sellers. Both buyers and sellers need to understand that one of the reasons that owners at smaller firms have lower billing rates is that they usually perform a lot of billable work typically done by low level staff at larger firms.

Falling in love. Many sellers make the mistake of rushing into a merger or sale before taking the time to assess the fit of their culture and personality with the buyer. This happens especially in cases where the seller has known the buyer for a long time.

State of the market. There is lots of pressure on organic growth at firms. Putney feels that it is likely that prices paid for small firms will go down as more and more sellers flood the market, allowing buyers to cherry-pick their mates.

For the complete entry, read “Merger Best Practices.”

From The Marc Rosenberg Blog, May 8, 2013, http://blog.rosenbergassoc.com.