Why is Merger Mania Gripping our Profession?
Much of it has to do with the disclosure in the section about acquiring and retaining younger talent but it does go deeper than that. Let's take a look at events in the late 1990s which set a foundation for the current merger mania:
- A 1998 AICPA conference was one of the first to focus on the plans of competing consolidators. It sold out, and was standing room only, and the AICPA had to rerun the event to accommodate the overflow from the conference.
- "Bigger is better" was the mantra driving the voracious M&A appetite.
- Consolidators such as CBIZ, HRB Business Services, American Express Tax & Business Services and Centerprise Advisors (now known as UHY) made bold claims and began a plan of executing very aggressive acquisition plans.
- Technology has made it easier to operate satellite offices
- Perhaps the largest factor: the aging of the Baby-Boomers
According to a 2016 AICPA survey:
- 35 percent of the CPA firm owners will retire by 2020
- In the next five years, 57.5% of the firms said they would have 25% or more of their ownership in transition and 27.8% will have 50% or more of their ownership in transition.
- In other words, a quarter of all multi-owner firms will have a controlling interest in the firm changing hands during this time period.
The major reasons merger mania is alive and well now and for the foreseeable future is that merging firms, at a minimum, expect to:
- Establish internal and external plans for their short term and long-term succession
- Establish competitive advantage
- Eliminate competitive disadvantage
- Affiliate for purposes of niche development and/or enhance current niche services or industry focus
- Solve a potential problem such as future succession issues or industry penetration
- Expand their geographic footprint for better client acquisition opportunity
- Cross-sell services
- Expand current services portfolios
- Stabilize revenue streams
- Leverage or use current excess capacity
- Build better bench strength
For more information:
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