This is no Joke

The other day I read in one of the accounting publications that the era of merger-mania in the profession is over.

Done.

Finis.

April Fools!

Sorry, I couldn’t resist that bit of sophomoric humor when I noticed on my desk calendar that March is over and we’re rounding third base with regard to the end of tax season.

No, as most of you are probably aware, merger mania is not within three area codes of being over. If anything, both pundits and those in the profession predict that if anything, affiliations between CPA firms will increase during the next few years.

But like anything else, the M&A landscape is shifting.

First and foremost, it is gradually and undeniably morphing to a buyer’s market. When just a few years ago, sellers had their pick of potential successors and along with it their target multiple, now because of a glut of firms facing succession issues, the acquirers have bragging rights with regards to the upper hand in deal negotiations.

And firms that could at one time command multiples as high as 1.5, they now would be lucky to receive one time. In less populated parts of the country, the figure might be significantly below that.

The age of the overpriced multiple has gone the way of the VCR and leg warmers.

Like oil, natural gas, soybeans or any other commodity, pricing is predicated largely a matter of supply and demand.

Which is why at a time when the supply is outstripping the demand, it’s probably a good idea after April 18^th to begin laying the groundwork to tackle any ongoing succession issues – whether through a merger or via the hiring hall.

One thing you don’t want to do is contact a company such as ours and vow that you’ve worked your last tax season and demand we do something about it. That’s hardly entering the M&A arena in a position of strength. And I don’t want to compound your situation by guesstimating what you would be able to get in terms of a potential multiple with such a fleeting transition period.

Let me just say it won’t be pretty.

So from someone who has seen the ugly byproduct of succession procrastination, I caution you not wait too long to act because the joke will be on you.

And I guarantee you won’t be laughing.