Is it Possible to Buy Part of an Accounting Practice?

Last week, David the CPA sent me a great question that I thought would be relevant to the market at large.  He asked, “Is it possible to buy part of a practice or must we be willing to purchase all of it?”

My response:

First, let’s separate the market between the single owner practices and the multiple partner practices. In the later, buy-ins occur particularly when the practice has a gross over $2 million and several partners of varying ages.  It is not uncommon in a firm of this nature for an outside practitioner to buy in to replace a retiring partner.

However, for a majority of the market, which grosses less than $1 million in annual gross the situation is quite different.

Partial buy-ins, buy-outs and carve outs are possible.  It obviously depends on the goals and plans of both the seller and buyer.  For example, if the seller has health issues, plans to relocate or wants to retire immediately or even in the next year or two, then a partial buy probably would not work.  It might be possible if their plans are a year or two out to structure a two phased purchase*, buy a portion today and buy the rest in a year or two.

From the buyer’s perspective, most acquire with the goal of gaining control and autonomy, which probably will not be the case in a partial buy. It takes a lot for most sellers to let go in the best scenarios, but it is certainly not a realistic expectation if they are still a working owner in the business.

Another concern for a buyer, if they separate some of the clients into a separate business (a carve out) should be retention.  The strongest point of retention is going to be the combination of an endorsement of the buyer by the seller and the fact that the seller is no longer available to the clients.  If the seller is still practicing, some clients may try to return to the seller instead of transferring to the buyer.

A partial buy also depends on the economic needs of the seller and the buying ability of the buyer.  Unlike a full purchase, a bank will not get involved with a partial buy, so any down payment will rely entirely on a buyer’s cash and terms will rely on how much of a note the seller is willing to carry.  This is usually the largest stumbling block in a partial buy.

So, yes buy-ins, buy-outs and carve outs occur and can be successful.  The key to a successful outcome, as in any endeavor of this nature, is being aware of what you are getting into and what the acceptable and unacceptable risks may be.

Let us know if you have any additional questions.

* A note on two-phased purchases: even with an "airtight" agreement, we have seen buyers change their mind and decide to not buy the rest of the practice at the appointed time.  This is particularly true when the buyer “acquired” the first portion with zero or little money down.  The result of this failed second half of the acquisition is huge mess for both parties.

This blog

ProHorizons is a national brokerage and consulting company focusing on accounting practice sales, acquisitions, and business development services since 1995.Our blog is focused on three aspects of our experience:  our first hand knowledge of the various layers to completing a successful transaction; the trends, changes and shifts in timing in the M&A market; and, our goal of assisting practitioners in developing long-term value so they realize maximum return when it is time to exit their practice.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

44793

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

77422

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

49784

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

91017
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
21673

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

57051

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

82233

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

25856

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

65610

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

35349
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
104472
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
27021

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

53976
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
28940
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
33305

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

102421

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

34616

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

113506

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

62545

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

40657
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
67706

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

93825

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

54894