One CPA firm owner received 11 offers and chose the buyer he liked best. That buyer paid above asking price even after learning the firm’s cash flow was lower than reported. Outcomes like that happen when sellers have leverage. In this episode of The Accountant’s Flight Plan, Brannon Poe and Morry Brown, Poe Group Advisors’ Regional Market Leader for California, look at what matters after price in accounting firm M&A: buyer fit, leverage, and control of the timeline.
About a third of CPA firm owners on Poe Group Advisors webinars say they have received an unsolicited letter of intent. Morry explains why LOI terms are almost always the best they will be, why diligence tends to lower them, and why the exclusivity clause is usually the only binding part of a non-binding LOI. One seller spent six figures in attorney fees on a one-on-one deal that fell apart at the last minute.
A structured process with multiple buyers changes those dynamics. When a buyer backed out of a San Francisco deal in early January, Poe Group Advisors brought in a backup buyer and closed in two weeks, before tax season began. That firm sold for a 10x multiple with 90% cash at close. Brannon and Morry also cover partner alignment, how to define success a year after closing, and why the selling season for CPA firms runs from June through December.
The Conversation Covers:
- Why LOI terms are usually the best they will be, and how diligence tends to lower them
- Why the exclusivity clause is the one binding part of a non-binding LOI
- How a backup buyer closed a San Francisco deal in two weeks after the first buyer backed out
- How a seller with 11 offers got his preferred buyer to pay above ask
- Why defining success a year after closing helps CPA firm owners choose the right buyer
- How clustering buyer conversations creates real momentum and stronger terms
Price matters in any accounting practice sale. But for most CPA firm owners, the deal they feel good about a year later is the one where the buyer fits their clients, their team, and their goals.
This Episode Is For…
This episode is for CPA firm owners who have received an unsolicited offer and are wondering how to evaluate it, partners ready to align on goals before exploring firm succession, and public accounting leaders curious about how multiple buyers change leverage in an accounting firm M&A process. It is also for owners who care deeply about their clients and staff and want a buyer who will take care of both.
TIMESTAMPS
00:00 – The Price Is Right. But Is the Buyer Right?
01:30 – Morry Brown’s background in equity research and private capital
03:00 – Why a third of CPA firm owners have received an unsolicited LOI
06:30 – Why most Accounting firm owners care about clients and staff as much as price
09:30 – Why LOI terms almost always get negotiated down in diligence
10:45 – Six figures in attorney fees on a one-on-one deal that fell apart
12:30 – The due diligence deadline red flag in a CPA firm sale
14:30 – A lower offer right before Christmas and the sunk cost trap
17:00 – How a backup buyer closed a San Francisco CPA firm deal in two weeks
22:30 – The exclusivity clause: the binding part of a non-binding LOI
27:30 – Aligning partners and defining success before a firm succession process
32:00 – A Nashville Accounting practice buyer with a bigger vision
36:30 – Why time kills deals and how clustering buyer conversations helps
40:30 – 11 offers and a buyer who paid above ask for a Texas cloud firm
44:30 – How seller mindset helped drive a 10x multiple with 90% cash at close
47:00 – Why August and the June to December window matter for CPA Firm sales
50:30 – Separating business risk from legal risk in the purchase agreement
TRANSCRIPT
Brannon: I’m Brannon Poe, and this is The Accountant’s Flight Plan podcast, where you can enjoy engaging conversations about mergers and acquisitions and accounting practice management. Listen in on strategies to build a more fun and valuable accounting firm.
Welcome to The Accountant’s Flight Plan podcast. I’m back again with Morry Brown, our regional market leader in California. Today we’re going to talk a lot about transactions. This will be a freewheeling conversation, but I think you’re going to enjoy it. We’re titling this episode “The Price Is Right. But Is the Buyer Right?” What we see a lot of times, especially in the market right now, is that everyone is very focused on price and terms. The question is: assume you get the check you want. Then what’s important? We’re going to dive into some of the challenges people face in deals, talk about some of the pitfalls, and give you some ideas around how to avoid them. We’re also going to talk a lot about fit and how to keep that top of mind as you approach a sale and evaluate buyers.
Let me reintroduce Morry. If you’re not familiar with him, he’s been on before and we’ve done some webinars together. Welcome, Morry.
Morry: Hey, thanks. A bit about my background: I came up on the capital markets side, spent about 15 years in New York in equity research, then moved to more of the private capital side over the last ten years, out here in California. I’ve been with Poe Group Advisors leading the California market since 2021.
Brannon: Let’s talk about how the numbers can blind you from some of the other important factors in a deal. I feel like in today’s market that’s happening more and more. You hear of valuations increasing, and you hear a lot of really exciting numbers being thrown around. Of course, you don’t always know what the terms are. How do people end up starting with numbers first?
Morry: One way is that they get approached off market and someone says they’re interested in purchasing their practice. That could be a traditional CPA or a private equity group. When we do webinars and ask how many people on the call have received an unsolicited LOI, about a third of the people on the call usually say yes. So it’s very common these days. When you suddenly see a large number and you don’t know exactly what the terms are, or how much of it is guaranteed versus paid at close, and you’re not prepped beforehand, that’s one easy way to get lost in the numbers.
Another way is if you go to market through a process and are talking to a number of different groups. The lead is always going to be the offer and what the numbers are. Even then, with more options and a larger pool, it can still be easy to get pulled into the weeds of the numbers.
Brannon: I have a client who forwarded me an email from someone making a cold outreach about acquiring his firm. They threw out an estimate of what the firm was worth, and I can tell you it was a very high number for this practice. They had no way of really knowing what it was actually worth, but those numbers get people’s attention.
Morry: And the numbers matter. Let’s not sweep that under the rug. People want to get the right check. The financial amount is very key to monetizing the practice. For many people, it’s their life’s work. In some cases, it’s their biggest asset. But once you have a number of people you’re talking to, the offers are generally going to be within some band of reasonableness. Most CPAs I speak to are concerned about things beyond price. Yes, they want to get the top amount for their practice, but they’re generally equally, if not more, concerned about how the buyer is going to take care of their clients and their employees. There does seem to be a long-term integrity component that is very important to most owners of accounting practices.
So it’s making sure you stay true to what’s in your head regarding fit and don’t always get pulled around by the numbers, because especially if an offer is coming on the front end without a lot of diligence, someone throwing out an exciting number, the likelihood of that going through at that level at the end of the transaction tends to be low.
Brannon: Buyers are moving fast today. They’ve always wanted to get to brass tacks quickly: what can I buy this for, what are the terms? And if things are moving quickly, you’ve moved to an LOI maybe before truly assessing fit. Then before you know it, you’re in the midst of due diligence, pulling data, possibly in legal, and there’s just a flurry of activity. You can’t focus as well on fit during all of that.
Morry: And if it’s a one-off approach, the buyer can pull you along in the process. It’s very easy to send out an LOI. They’ve got form letters for that. And the LOI terms are almost invariably the best they’re going to be. They almost always get negotiated down during diligence. That can lead to real frustration. If someone’s approached you and you’re sort of flattered by the number they’re offering, you can get pulled along. We had an example of somebody who spent six figures on attorney fees negotiating a deal that fell apart at the last minute. Those are the types of situations we caution people to avoid: going too far down the road with a single buyer. The risk you take on by doing that is substantially more than if you go through an organized and structured process.
Brannon: Let’s talk about some of the leverage shifts that can happen in a deal, because that’s where a lot of those pitfalls show up in a concrete way. One thing I always look for is: when an LOI is submitted, at what point does the purchase agreement have to be complete, and when is due diligence, where’s the deadline? I’ve seen some buyers propose that due diligence runs all the way up until closing. To me, that’s a big red flag. You want to have points where you check in and see if you’re in agreement. If not, no one’s overly invested, other options can be explored, and you’re not spending a hundred thousand dollars on legal fees.
Morry: To keep going on the diligence point: let’s say you’re trying to close by December 31st, get out before tax season. Then you get a call from the buyer right before Christmas and they say they’re going to lower the offer because they found something in diligence. If you’re just negotiating one on one, you’re now faced with a decision after months of work, possibly spending money with attorneys and advisors, and you’ve got all this sunk cost in the process. While we all know economically you should avoid factoring sunk cost into your decision, it’s really hard as a human being to do that. You could feel this tug of: do I go through with this at a lower value because I’ve already got all this time and money tied up, or do I walk and look at selling next year and go through tax season again when I wasn’t planning to? And even if you go through the sale, what kind of experience are you going to have transitioning to work at this new firm if you felt pressured into terms you did not want?
Having a process in place really helps. A firm we sold in San Francisco a couple of years back had a very similar situation. The buyer backed out, I think it was the first week of January, and now they were looking down the barrel of going back into tax season where they hadn’t planned to. Because they ran a process with us and had multiple buyers in place, we had backup buyers, and we were able to switch the buyer and get the deal done in two weeks before we really got into the teeth of tax season.
Brannon: The leverage when you’re negotiating one on one covers price, terms, and whether you even make the decision to sell. If you’ve got a larger pool of potential buyers and somebody pulls out, you can replace them. If somebody tries to negotiate the terms down, you can go to someone with a better offer. It just makes the selling process and the transition much easier to execute, because a lot does come down to that last week or two right before closing.
Morry: And that point right before closing can feel pretty daunting if you think you’re going to close and then face the possibility of that not happening. Whether it’s intentional leverage or not, if the buyer is talking to six, eight, or ten firms and they’re professional negotiators, they don’t have to be malicious to create a difficult situation. And there certainly are people who will throw in terms at the end just to see what they can get, knowing the most a seller can say is no. If you have options, you can deal with that. If you don’t, you’ve got a binary situation: say yes to something you don’t really want, or go back to square zero.
What was interesting about the San Francisco example is that when you have a motivated buyer who can close, it’s amazing how fast the excuses and the dragging disappear when they know you have real alternatives. That’s the only way to change the leverage dynamic: having real buyers on the other side to move things along.
Brannon: The party that controls the timeline controls the deal. That’s always been true. If a buyer is dragging their feet or the purchase agreement is not coming through when it was supposed to, that can be a really big red flag.
Morry: Absolutely. And one of the most important pitfalls is the moment you sign a letter of intent and grant exclusive rights to a buyer for a certain period of time, you automatically cut off your options. You have to be really thoughtful before you sign and give away that leverage. It sounds simple, but the one binding characteristic of a non-binding LOI is almost always the exclusivity clause. If you haven’t talked to other people before you sign, you are literally not allowed to talk to other buyers during that period. You are handing over the leverage.
I heard a great quote from a financial advisor: he could be the best negotiator in the world, but if he only has a handful of buyers, compare that to the worst negotiator who has 20 or 30 buyers. Who’s going to come out with the best deal? It’s probably the one with the quantity of buyers. The leverage is all about what’s real on the other side. If you have to pretend you have more leverage than you do, it doesn’t tend to work out, for the same reason bluffing doesn’t work well in poker.
Another pitfall: you get approached by a single buyer, you’re not super interested in selling, but you go ahead with the conversation because it feels easy at first. At the end, you’re going to pull data, build out a profile, do all the things you would do in a process. You’re just doing it later and with a single buyer. Then when you’ve done all that work, it feels even more daunting to back out and start over. You get into sunk cost mentality. There can also be a breadcrumb pattern, where a buyer leads you along step by step with no binding obligation on their side. The commitment is all in your own head.
Brannon: So how do we flip this around and put fit top of mind as we enter a process?
Morry: One of the most important things is getting all the partners aligned first. Make sure everyone is on board with going through a sale, understand the timetables of all the partners, who wants to exit and when, who wants to stay. Then dig into what the goals are for everyone, what’s really important. I like to ask it this way: let’s say you want to close in six months. If we have a conversation a year from now and you’re looking back, what has to have happened for you to be happy with that deal? You get similar answers from most people. They’ll say price, strong terms, cash at close, out of the risk of ownership. But then it almost always gets into clients and staff. Most owners genuinely care deeply about their teams and their clients.
Then you start digging into what they want after the sale: do they want to work less, work the same amount, just not handle administrative work? And then you start asking what kind of buyer would they be happy about six months after closing. Get them to picture the future and look back. What does success look like?
Morry: Defining success before you ever start thinking about a process is a super important thing. My background in equity research was very similar to CPA work: detailed, bottoms up, sector-focused. It is difficult to take yourself out of that and go up to the big picture level to ask the key questions: what do I really want my life to look like a year from now? The honesty required for that exercise is key. And then working backwards from there, you can start to have conversations like: if I care deeply about my employees, people I’ve worked with for 20 years, I probably don’t want to sell to a buyer whose strategy is replacing staff with AI. Having those thoughts ahead of time, both internally and with an advisor, is just really helpful for overall satisfaction on the other side of a transaction.
Brannon: Building out the firm profile or SIM is also part of that process of zooming out and looking at your practice with fresh eyes. We ask firm owners about their mix of services, their culture, why their team is loyal, why they have long-standing clients, what their clients really like about their firm. Getting all of that on paper really helps in terms of thinking about who we need to find in the marketplace. Maybe not just someone who will work here, but someone who will thrive here. And hopefully that buyer has a bigger vision for the business than the seller does. I’ve seen that happen before. We had a practice for sale in Nashville, a firm that had some well-known musicians as clients. The buyer was out of Texas and had a really big vision for the company. I checked back a few months after closing and the team was excited, the new owner communicated direction very well, and years later the firm had grown well and kept most of the clients and team. A successful transition can be outstanding when you’ve got good fit and put the firm in the hands of someone who can take it to the next level.
Morry: And that profile, when it’s done well, will resonate with the right people. The right buyers will see it, get excited, and move forward. If it’s not a fit, they self-select out and you’ve spent zero time on them. That’s the first and maybe most important filter in the whole process.
If you flip the leverage scenario on its head, for top-tier firms we sometimes get over 100 buyer inquiries. That puts you in a dramatically different position. You can enforce deadlines, apply niche filters, narrow from 100 buyers to 20, have calls with them, set an LOI deadline. Now you’re running the process instead of somebody on the buy side dragging you along.
Brannon: It’s not unlike running an efficient hiring process. You get as many resumes as possible, find a way to filter, have one team member do a first-round interview, and as an owner you might interview the final three. M&A works very similarly. And one of the key strategies with focusing on fit is clustering buyer conversations together. Time kills deals. If you talk to one buyer one week and one buyer the next week, by the time you get to the third week the first buyer may have already moved on and bought somebody else’s practice. Having that critical mass in a week or two is where you get the real leverage. And the process and deadlines are not bluffs, they’re not fake demand. We’ve got multiple offers here. You’ve got to get your offer in by Friday. That’s a real thing. It builds true confidence in the seller. When that confidence comes through, buyers feel it. They feel the momentum, they feel the demand, and if they want this business they need to move quickly.
Morry: The party that controls the timeline controls the deal. Always. Going slow in prep so you can speed up when you need to, that’s the discipline. If you skip the upfront work you’ll be playing catch up once buyers come in. Disorganized data rooms and delayed diligence documents give buyers a bad impression right out of the gate. If you set up a process where it’s run professionally and you’re sending the right signals, it changes everything. And when the seller is not feeling the fear, when they’re not worried about the buyer having the upper hand, they can refocus on what’s actually important: fit.
There’s also an interesting strategy where you can use offers from buyers who might not be the right fit to get better terms from the buyer you actually want. We had a cloud firm we sold in Texas a couple of years ago with a lot of demand, selling at a high multiple. The seller talked to everybody and had 11 offers. He liked one particular buyer, but that buyer didn’t have the highest offer. Our advisor went to the preferred buyer and told him two things: first, there was a misstatement in the financials, so the cash flow was actually a little lower than reported, and they wanted to be upfront about it. Second, if he wanted the practice, he was going to have to pay above ask. The buyer said: so you’re telling me I’m going to make less money than I thought, and I’m going to have to pay more for it? Yes, that’s kind of where we are. He bought it, he was happy, and he was successful with it. You can only do that when you have other buyers. There’s no way to do that in a one-on-one deal.
And it translates beyond price. Let’s say the best-fit buyer wants you to stay on for two years, but you only want to stay six months. If you’ve got other offers where the transition period is six months, you can go back to your preferred buyer and say: I’ve got other options that give me six months. Will you do that? All of those hundred little items that get negotiated at the end, the leverage lets you work them in your favor. And that helps with both fit and with getting the terms you want.
Brannon: One of the things is the state of mind of the seller. For us, these processes are second nature. But if you’re selling your practice for the first time, this is entirely new. And inevitably, what happens through that process is there are ups and downs. It’s easy to get distracted when the buyer you thought was perfect says they’re bailing out and you feel a little letdown. That’s human nature. Working with a group that’s been through it many times helps the seller stay in the right frame of mind. If you’re operating in a state of fear, you’re not going to make great decisions. The more a seller can look at it as a process with guardrails and timelines, the better. If there’s bad news today, it’s okay. Next week will be better. That frame of mind helps the seller make the best decision for them.
Morry: That San Francisco deal we mentioned, everyone loved that practice because everyone loved that seller. He was very positive, high energy, genuinely optimistic about the firm. That energy, I believe, helped him get the deal that he got. That firm sold for a 10x multiple with 90% cash at close. Part of the valuation was driven by how the seller showed up in those meetings. I’m a big believer in mindset. There’s a lot of research on it. Staying in a positive frame of mind and being able to roll with the punches is a massive advantage.
Brannon: Do you have any funny stories?
Morry: Nothing really jumps out as funny, but I’ll say this: August seems to be the single month out of the year where CPAs think about selling more than any other time. I don’t know if it’s because they have a bit more time away from work, but we consistently get a dramatic uptick in calls in August. And for anyone thinking about timing, the selling season generally starts in June and runs through December. This is prime time. If you take a practice to market now you can look at getting the deal done by end of year. If you come to us in November or December, we can prep things and get them ready. But be aware of the calendar. It goes fast. Tax season comes around before you know it.
Brannon: You want to choose a transaction you’re going to feel good about later. That’s something you have to keep top of mind throughout the process. It helps to set the goals ahead of time, but it also helps to keep that leverage, to keep the deal from getting away from you. Once you commit to a buyer and go down that due diligence path and start the legal work, that takes on a life of its own. If you haven’t made a good choice when you sign that LOI, you’re in for a rough ride.
Morry: You’ve got to make the right choice on the front end. And you’ve got to maintain support with other buyers in place, just in case. Even the perfect fit can have things break down at the end. At the end of negotiation, when there are 25 items still to sort out, pick the ones that matter most. Don’t try to win every single negotiation. A good negotiation is not about winning every item. It’s often about giving the other side the items you don’t truly care about and getting the ones you do. The more you can segment into those columns, the easier it is to keep your brain straight.
Brannon: Lawyers can make you focus on the wrong thing sometimes. We did a podcast a couple of years ago with a prominent lawyer in the Southeast, and I love the way he phrased it: separate business risk from legal risk, and depend on your lawyer to advise you on the legal risk. If you’re a CPA and a business owner, you understand the business risks. And often what has to happen at the end is that the two business owners have to align on business terms. You can have attorneys on both sides being apocalyptic about a certain item from opposite directions, but if the business owners can align on the commercial terms, the legal almost always follows fairly easily.
Morry: Love it.
Brannon: All right, Morry, thanks for joining us again. This has been a fun conversation.
Morry: I’ve thoroughly enjoyed this. I can’t believe we’ve been on air for over 50 minutes. It’s gone by fast. Thanks for having me.
