Changing technology, talent shortages, high interest rates, and a potential recession have many CPA owners questioning if they should pursue acquisition. However, acquisition can solve for several of these concerns and help CPAs ride the waves of turbulence.
For example, many CPAs acquire other CPAs for the sole purpose of adding their employees to the rooster. Or, another CPA may have mastered a new technology and through acquisition the acquirer will be better able to compete in the changing technological landscape. Even though interest rates are high, the right acquisition opportunity will boost revenue and increase economies of scale, allowing for more buoyance in turbulent times. Consider these factors as you continue to operate and decide the best growth opportunities for your practice.
If your goal is acquiring another CPA or its client base, finding the right opportunity that fits your needs is critical to achieving expected results. Before your search begins, give some thought to what would constitute an ideal acquisition.
Successful CPAs know how to tap into knowledge and advice from various experts. This is especially important when it comes to acquisitions. Build a team of external experts who are experienced in the acquisitions and keep them involved throughout the entire process. They will provide additional viewpoints and identify issues you may not have considered.
Be sure to do your homework before retaining a professional or signing a contract for services and, again, consider seeking referrals from colleagues who have used outside advisors in their own acquisitions.
Whether you are considering debt or capital to fund your acquisition, find a trustworthy partner to secure your acquisition funding. Your relationship will continue beyond the deal’s closing, and a long-term relationship may form.
If there’s a single secret to a successful acquisition, it’s due diligence. While many buyers find the process long and tedious, the more you know about the practice you plan to acquire, the better you’ll be able to integrate it into your own company. Failing to perform adequate due diligence is a key reason many acquisitions fail.
To protect your financial interests and professional reputation, answer these questions:
Finally, don’t allow your emotions drive the process. The seller is excited at the prospect of a large influx of cash, while you’re excited about the opportunity to grow.
An accurate valuation is critical. Finding this involves both some art and some science. Several formal models are in wide use, so it becomes a matter of choosing the one that’s right for you. That choice and the number it ultimately provides are subjective but will provide a crucial stepping stone in your decision whether or not to acquire.
Using acquisition as a growth strategy can be both exhilarating and daunting. Acquiring, however, is a great way to take your CPA to the next level.
Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.