Buyers Talk: Big Merger Turnoffs

Merger talks hitting a bump in the road? Is a potential buyer losing interest? Here’s a list of obstacles buyers I’ve worked with recently have cited. Not every buyer will consider each one of these issues a turnoff. Think of this as a universal checklist.

• Stickiness of the seller’s clients. Clients may be overly attached to one of seller’s partners.  Buyers buy firms with clients that will stay.
• Too many stand-alone 1040s and write-up work and not enough business clients.
• Seller has an equity partner who really is not a partner; no origination or leadership.  Works like staff.
• Seller with income in the stratosphere (usually a solo) who is unwilling to take a pay cut; seller doesn’t understand that he/she can’t make the same income in the buyer’s overhead structure.
• Seller’s staff is weak; low billable hours, low competence, too old, no upward potential.
• If seller’s staff does not have partner potential, they should at least have good client relationships and engagement experience.
• Seller not a good strategic fit. Buyers want sellers with the potential and desire to cross-sell their ancillary services.  Buyers are most interested in sellers with specific areas of expertise and least interested in sellers with the same generalist practice they already have.
• Seller wants to work WAY PAST retirement age. Buyers don’t like old guys hanging on.
• Work quality gap between seller & buyer too wide. Seller’s clients won’t be profitable conforming to the buyer’s work standards.
• Seller wants ridiculous terms re: sales multiple, high downpayment, etc. Too many “must haves.”
• Seller has too many partners; buyers reluctant to make all sellers’ partners an equity partner.
• Seller provides wealth management services but won’t change their broker-dealer to the buyers’. Or, seller does not provide wealth management. Some buyers only want a CPA practice with
• Seller is retirement-minded, wants out too quickly to properly transition clients. Staff too weak.
• Seller who is slow in responding to buyer’s efforts to move the merger along.
• Seller office lease has too many years left.
• Seller has key people who won’t stay or has problem partners that seller wants buyer to “fix.”
• Seller woefully behind on technology. Will learning curve be too steep?
• Low billing rates. Low realization. Low-level clients.  Concerns over compatibility between buyer & seller.
• Seller has lots of bank debt, almost always due to partners overpaying themselves. Seller often wants buyer to take on the debt, which will never happen.
• Seller has one or more branch offices that are not successful.