Valuing an Accounting Firm

Accounting Firm M&A in the World of the Coronavirus

Originally published in AccountingToday, April 2020
The economic downturn we are experiencing is clearly unprecedented. The projected drop in the GDP and level of unemployment are anticipated to be as bad as the Great Depression. 
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Why is Your Firm Worth Less Than You Think?

Originally published in AccountingToday, March 2019
The rule of thumb in today’s market is that internal valuations (defined as a multiple of revenues) are running roughly about 80 percent of the value firms can expect to receive in an outright sale.
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Five Variables When Valuing a Small Firm

Originally published in AccountingToday, December 2018
The value of an accounting firm is dependent on many factors -- the nature of the practice, it’s size, how profitable the buyer thinks it will be, the perceived competition for the practice from other interested buyers, and its location, as well as many other factors.
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Making 2+2=5 in a Merger

Originally published in AccountingToday, October 2018
The real test in assessing a target firm for a potential merger or acquisition is evaluating how profitable the seller’s practice will be once combined with the acquiring firm’s operating environment..
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Mergers and Acquisitions of Accounting Firms

Originally published in The CPA Journal, December 2017 
Mergers and acquisitions are a typical way for accounting firms to grow, expand into new markets, build expertise, and provide for succession. But not all mergers are true combinations of equals, not all firms are ideal matches, and not all acquisitions are structured the same way.
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Pricing Issues for Midsize and Large Firm Sales

Originally published in The Journal of Accountancy, November 2014
It's no simple task for accounting firm owners to figure out how much they should be paid when they are looking to sell. The job is especially complex for firms with at least five owners.
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Pricing Issues for Small Firm Sales

Originally published in The Journal of Accountancy, October 2014
For CPAs looking to sell their accounting practice, it can be a big plus to be in a small firm. That's because small firms generally can command higher multiples than big firms, and external sales usually produce higher prices for accounting practices than internal ownership transfers.
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How to Price an Owner's Interest in a CPA Firm

Originally published in the Journal of Accountancy, December 2014
Dramatically different demographic and market conditions require new strategies to pay for buyouts.
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Alternative Deal Structures for Succession

Originally published in The Journal of Accountancy, January 2014
For CPAs in public practice, the path to retirement usually follows one of two roads - an internal succession or a sale to an external buyer, with the external route offering additional options.
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How to Value a CPA Firm for Sale

Originally published in the Journal of Accountancy, November 2013
One of the key components of a CPA succession plan is the sale or transfer of the retiring CPA's ownership interest. How is the value of that interest determined? In most circumstances, the value of an owner's interest is different when selling to an external buyer than it is in an internal transaction.
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A Two-Stage Solution to Succession Procrastination

Originally published in The Journal of Accountancy, October 2013
Deal structure provides a path to retirement for CPAs who fear a loss of control or income.
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CPA Firm Mergers: Is It a Buyers' or Sellers' Marketplace?

Originally published in AccountingToday.com April 19, 2012
Like most scenarios that include a buyer and a seller, the marketability of CPA firms adheres to the eternal law of supply and demand. The demand for a practice is heavily based on the size of a firm (in gross revenues) and the location. Depending on demographics and geography, some areas of the U.S. are definitely skewed toward the buyer, while others favor the seller.
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The Great Mystery: How Do Billing Rates and Profitability Affect a Firm’s Worth?

Originally published in the Practicing CPA by the AICPA July/August 2011
When you are buying a CPA firm, historical profit is almost irrelevant. Even less relevant are the partner billing rates. What? How can that be? When establishing the value of any business isn’t its profitability the most important metric to consider? Isn’t partner billing rates the most important way to know if two firms are a good fit?
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Succession Planning--Valuing Partner Equity in Larger Firms

Originally published in the CPA Practice Management Forum, December 2009
Succession planning is the foundation that creates a successful transition of client relationships. This article discusses how to capture and measure the value of the firm once the succession has commenced.
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