FROM OUR PARTNERS

7.

Concentration Of Revenue

Risk and reward are huge in the M&A decision process. Much can be determined by knowing the percentage of revenues that come from the largest engagements, and from fees in varying bandwidths (especially the low end). Early in conversations, the parties should delve into revenue concentration to determine risk/reward and the degree of effort that may be required for transitioning.

8. PRODUCTION OF STAFF

Profits are highly dependent on personnel costs. ROI will vary from firm to firm, but managing ROI and targeting results should be routine for parties. Often, there may be potential to re-engineer and train people to work on more sophisticated projects or capitalize on more efficiencies. Knowing the production per staff member is an important barometer for evaluating deal upside.

9. REALIZATION TRENDS

Realization percentages are helpful to understanding the client engagement experience.

Examining the trend will tell players whether engagements are improving in performance, and what it takes to generate the improvement. The number and type of engagements that stagnate at a subpar level will be relevant to the timing and viability of a successful integration. It’s also helpful to know how close to the market rate your firm’s realization rate is when correlated to the market rates per hour. Tracking realization rates for different service lines will be helpful as well.

10. CLIENT INPUT

All firms rely on strong client satisfaction. The more authentic and in-depth your client input is, the better the integrity of the satisfaction barometer. Client surveys and interviews should be compiled with the metrics available for analysis by all parties at the M&A table.

Successors need to see realizable potential. Robust metrics are key to enabling the successors to make their decision. Sellers need to be ready to step up their entrepreneurial behavior to compete with other sellers, and to have analytics that best tell their story. The metrics noted here will convey the data and narrative to potentially support a smart business decision for all parties to win at M&A.

Ira Rosenbloom, CPA (LR), is chief operating executive for Optimum Strategies. He is known as The Merger & Succession Solver℠ for his objective and proven guidance in evaluating and completing M&A transactions. As COE of Optimum Strategies, which he founded in 2010, he advises CPA firm leaders on matters of internal and external succession, including optimizing competitive advantage and improving performance and profitability. Ira previously served as managing partner of a mid-sized regional accounting firm, practice director for a national firm, and as regional partner in a national CPA M&A advisory firm.