October 2010 Letter

October 1, 2010

The merger and acquisition market is beginning to heat up as we head into the fall.  This is frequently the case since the accounting and tax industry is a deadline driven profession.  You know, those deadlines that frequently correspond to the 15th of the month.  Many buyers and sellers of accounting and tax practices attempt to time their sales to take effect after October 15th but before the tax season gets into full swing.  

My recommendation for 2010 is not to wait much longer to begin the process.  The last thing a seller wants is for a closing to “slip” in to 2011 with the potential for higher capital gains rates.  We do not know that this will happen, but many experts are predicting that lower capital gains rates will not be extended when they expire at the end of the year.  

Our seller listing activity is running significantly ahead of 2009 but we still feel there are many more buyers than practices available in most metropolitan market.  We are finding that buyers are being more diligent in their acquisitions.  It really needs to be a good fit for them to close the transaction.  This is a good thing.

Financing practice acquisitions through SBA loans is easier this year since the regulations implemented last year are now known.  Conventional lending for CPA and EA practice acquisitions is not as good as in 2008 but there are several lenders considering or testing programs now.  

So what should a practice owner do?  For someone that hopes to sell their firm before the 2011 tax season, do not delay.  The time to start the process is now.  We have found that those practice owners that start the selling process early are much more likely to have a successful outcome (better choice of buyers, more money upfront and better overall price) than those that wait until October or November.

If you have any questions, or simply want to talk through possible scenarios call or email me.

Sincerely,

John R. Ezell, CPA, CEPA

President, ProHorizons Network, Inc