If you don't like the merger & acquisition landscape in accounting, wait a little while — it will change.
"It's constantly changing, constantly evolving," Doug Lewis, a managing director at M&A advisors The Visionary Group, told attendees of a session at the BDO Alliance's 2025 Evolve Conference, held in Las Vegas this week. "In just a couple of weeks there could be an entirely new option."
From the multiple flavors of private equity and traditional M&A deals, to employee stock ownership plans and even initial public offerings, accounting firms have never had so many options to choose from — but that means firms have to make hugely consequential choices at a time when the rules are in constant flux.
"There are a lot of things happening out there in the marketplace — it's not just PE," he said, noting that of 22 deals his company worked on over the past year, nine involved PE, but 13 were more traditional accounting firm mergers. "There's no one right path for a firm."
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With all that in mind Doug Lewis and Bob Lewis, the founder of The Visionary Group, shared a number of rules for success in accounting M&A — for both buyers and sellers.
Rules for the target market
The first step for every potential acquiree is to decide if they want to be acquired. Many don't — but that's a choice that should be made after careful deliberation.
"If you do want to remain independent, stress-test your succession plan — and if you don't have one, that's where you need to start," explained Bob Lewis.
Remaining independent is perfectly possible, but comes with its own struggles; firms that decide that a deal is a better bet for them should keep the following rules in mind:
1. Manage your expectations. Stories of private equity firms paying exorbitant amounts of money have filled accounting firm partners' heads with unrealistic ideas.
"Stop listening to the multiples from other deals," said Bob Lewis. "It's unique to each deal. Everyone says, 'I want a multiple of 10 or 12 because I heard someone else got one.' The only multiple you know for sure is CBIZ [because it's a publicly traded stock]. The rest is all scuttlebutt from the rumor mill."
The final multiple in any deal will involve so many different factors that no other firm's multiple can be a useful guide.
2. Look for your hidden value. Acquiring firms are often looking for opportunities to quickly grow an acquired practice, so what at first might seem deficiencies can actually be attractive.
"If you're exploring selling or merging, knowing the hidden value of your firm is valuable," said Doug Lewis, before laying out a number of these deficiencies, including a lack of advisory services or a wealth management practice; having weak client pricing; not taking advantage of outsourcing; or coming from a less expensive area with lower-cost professionals.
3. Stick to the facts. The financial and operational data firms share should be accurate and honest. "Some firms try to get very creative with what their true value really is, only to find out that these large acquirers are really good at math," said Doug Lewis. "More often than not, the BS will get sniffed out."
4. Pay attention to the right stats. "Revenue per head is the benchmarking metric that most acquirers are looking at," explained Doug Lewis. "$200,000 is a healthy level; we've seen as high as $500,000, but $200,000 and above and you're doing OK."
Other valuable metrics include revenue per equity partner, and realized dollar per hour.
5. Clean up your act. Both Lewises agreed that these characteristics would make firms less attractive as acquisition targets: a high volume of 1040s; high billable hours at the partner level; an unintegrated firm with an eat-what-you-kill approach; a lack of standardized processes; lots of very small clients; and not tracking hours. (The last item isn't about billing, Bob Lewis said; it's about not knowing how your firm operates.)
New rules for acquirers, too
It isn't just PE firms that are going out to make deals; more and more accounting firms are adding M&A to their growth strategies. But they may find themselves losing out to their many competitors if they don't pay attention to the following rules:
1. Move faster. Traditional accounting firm deals used to unfold at a stately pace, but no longer. "Time kills all deals," Doug Lewis warned. "There are some really bad acquirers out there who will drag a deal on for two, three or four years. There are phenomenal acquirers who can do it in just a few months. The lack of speed kills deals."
"If it takes you three months to get back to a target, what message do you think that sends to them?" asked Bob Lewis.
2. Bring cash. Private equity has accustomed firms to the idea that they'll get cash right away — something that didn't used to happen in traditional firm M&A, but is increasingly common now. "We've seen the cash component skyrocket in just the last three to six months," said Doug Lewis. "We're seeing much more cash in the deal. It's rare to see less than 30% of cash, and we're seeing as much as 50-60%."
3. Don't try to unbundle a firm. Telling a target firm that you're only interested in one part of their practice won't work. "You've got to buy the whole thing," said Bob Lewis. "You can't go in and try to buy 60% and leave them with the worst clients."
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4. Don't start by being picky. With cultural and personal fit being so important, heavy scrutiny of the books can wait a bit. "Ripping apart the numbers of a firm before you even start to put a deal together is often the kiss of death," said Doug Lewis, who told a story about a $20 million deal that was derailed in its second meeting when the would-be acquirer came in asking questions about a $6,000 discrepancy in the target's financials.
5. Have a process. A surprising number of firms take a more or less ad hoc approach to M&A. "You have to run a process if you're going to be competitive in this marketplace," said Doug Lewis. "So many firms have pushed these down to people who've never done a deal in their lives."
6. Have a single go-to guy. Like many things, M&A deals shouldn't be run by committees. "Have one leader run point on all the meetings," said Bob Lewis. "We've had calls with seven partners on the call, and they'll start asking questions. And your lead needs M&A experience or some coaching."
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