That Dreaded C Word!

                                            

Legendary investor Warren Buffet once remarked that writing a check was the difference between making a commitment and participating in a conversation. Or, breaking it down in simpler terms, take a basic recipe of ham and eggs. One can surmise that the chicken participated, whereas the pig made a commitment.

The “C” word – commitment - has been hard to come by these days – particularly within the sphere of CPA firm M&A.

There’s always existed an intractable dichotomy in any deal – whether selling a CPA firm or a used car. The buyer wants to pay the least amount for the item in question while the seller firm wants to get as much as they possibly can.

Add to that the fact that accountants have historically, been about the least decisive demographic when it comes to making a personal business decision that I have ever encountered. They can easily dispense sage advice to clients, but when it comes to their own firms, they stammer and hem like a confused contestant on Final Jeopardy.

No matter the facts to the contrary on their lack of succession, many just cannot bring themselves to pull the trigger. And the COVID-19 pandemic has only served to exacerbate their indecision.

I realize that meeting a potential buyer/successor over a Zoom or Microsoft Teams call will probably not prompt most people to sell or merge without actually meeting said buyer in person.

But take a recent example of a four-partner firm in the Northeast. Some 50 percent of their owner group plans to exit from full time in less than three years. They have a haunted house in terms of people on their bench to assume the leadership reins, yet after more than a year of dialogue with a potential successor firm that they had met pre-pandemic, they pulled the plug.

So, in essence, they are right back where they started from.

Ditto for a single owner firm in New York. The owner is in his mid-70s, has no one on his bench, had a firm offer from an established and well-regarded practice but instead entertained an internal buyout offer from a non-equity partner who wants to exit in three years himself. Let me repeat that for emphasis – he shunned an offer from a practice experienced in M&A and client transition for a crapshoot on someone just a few years younger than he with no experience in running a firm or in business development.

I wish I could tell you these examples are outliers, but unfortunately it is more than norm than the exception.

Almost as common as ham and eggs – sans the commitment.