Buyer Due Diligence Process from the Seller’s Perspective When Selling an Accounting Practice

You made the decision to sell your CPA firm and now you’ve found a promising prospective buyer.

Hopefully, you have already required the buyer to sign a nondisclosure agreement. As a knowledgeable professional, you understand any buyer will need to perform their due diligence on your firm. But when it’s actually happening, it can sometimes be as uncomfortable as wearing a speedo at the beach. You might feel exposed and vulnerable, and unsure about what is and what is not reasonable in the due diligence process. Here are a few guidelines.

First Phase

Once you narrow down your choices to a handful of prospective buyers, they’ll want to see some financial information. At this stage, before things get too serious, you’ll only provide summary information such as P&L’s and other general information. The prospective buyers meet with the seller, look at some high level information and get a general feel for the practice. At this point the seller should weed out the less-than-perfect buyers. The buyers are deciding whether or not the firm’s a good fit.


Confidentiality throughout the process is critical to the seller. One of the many benefits of utilizing Accounting Broker Acquisition Group to sell your CPA firm is that we help you maintain the highest possible level of confidentiality throughout the process. We are able to do this because of the proactive, hands-on process that we use in screening possible buyers for your CPA practice. Unlike some of our competitors who are essentially listing services, we do significantly more than just provide you with a list of buyer prospects for you to perform your own follow-up and negotiations. Instead, Accounting Broker handles everything . . . marketing, promotion, confidentiality procedures, and negotiations . . . but you are in the driver’s seat.

Initially, a prospective buyer receives only a very general description of your practice, disclosing just the general geographic area and the approximate billings. Once we have an initial discussion with the buyer and determine a level of interest and general qualifications, we have the prospect prepare a buyer information form and sign a non-disclosure agreement (NDA). Once a signed NDA is received, we send redacted summary financial information on your practice. This information goes through a multi-step review process during redaction to insure that any information specifically identifying the firm or its owner is removed. We then confidentially talk to a large number of buyers and conduct a pre-negotiation to screen out “bottom feeders” and earnout-only buyers. We then provide the seller with a short-list of the most qualified buyers. The seller has the discretion to accept or reject a meeting with any buyer. Only buyers accepted by the seller are provided the seller’s name. At this point, the first face-to-face meeting with the seller is scheduled, and only then is the seller’s identity disclosed to the buyer. Before a letter of intent is signed by both parties, the seller does not permit the buyer to perform any due diligence, other than review of the redacted financial information and questions during the initial meeting.

At the end of phase one, Accounting Broker’s goal is to negotiate the best price and terms for the seller documented in a written Letter of Intent (LOI). We typically receive multiple LOI’s for the practices we sell.

Once the best buyer’s LOI is accepted by the seller the due diligence process begins.

Office Visit

After the seller receives and accepts the LOI, it is time to share more information. This part can be hard on the seller, who may feel invaded and put under a microscope. Try not to take it personally. Remember, if the tables were turned, you’d need to fully vet the financials of a business you wanted to acquire. An additional nondisclosure agreement (NDA) is signed between the seller and the buyer regarding any information obtained by the buyer during the due diligence process. (This NDA is an additional layer of security to the previously signed NDA between Accounting Broker and the buyer). The seller should not allow the buyer to begin the due diligence process until this agreement is executed.

The prospective buyer now comes into the seller’s office to take a hard look at things. Just like kicking tires at an auto showroom, the buyer will want to go through some of files, and do a mini-audit of your books.

To make this phase easier, the seller should be prepared. It’s important to be very neat and organized. If your bookkeeping is a mess, the buyer is going to start getting nervous. He’ll wonder, what is this guy trying to hide from me, and is it going to end up being a problem?

Guide the prospective buyer through a few files to show how your firm does business. Walk him through your major processes and procedures. Expect the buyer to want to verify the financial information you already provided. The buyer may wish see internal ledgers, bank deposits, payroll information and book-to-tax reconciliations for the firm, among other items.

Protect Your Interests

For the smoothest transition from old owner to new, you must avoid spooking your employees. You want to wait until a sale is definitely going to close before you inform your staff. Therefore, bring the prospective buyer in for due diligence work in the evening or on a weekend when your employees aren’t in the office. Word travels fast. One employee will tell another, or will tell a client that you’re selling the firm. You want to be in control of making these announcements.

Set Limits

Set a reasonable timetable for the due diligence process. The buyer should be able to get all necessary information in two or three meetings unless there are extenuating circumstances. Set specific times for their office visits. We’ve seen situations where a buyer tried to postpone due diligence for five or six weeks . . . or even months. Don’t allow this unless there are good reasons for such a delay.

Final Phase

The buyer will want to talk to the employees of the CPA practice. If retaining a key employee is crucial for the practice’s smooth transition and future success, the buyer will want to make sure that employee is sticking around. But this should be one of the last procedures prior to closing – after due diligence has been completed, the bank has approved any loans, and the buyer and seller are in agreement related to the terms of the purchase and sale agreement. Wait until the last possible moment. Even the most discreet and trusted employee will have difficulty keeping this news to himself.

Due Diligence on the Buyer

A seller should not forget to perform due diligence related to the experience, creditworthiness, and reputation of the buyer. This due diligence is less extensive than buyer due diligence related to the seller’s firm . . . but it is equally important.

Getting Help

Nothing makes selling your CPA practice easier than having the most experienced business broker in your corner. Accounting Broker Acquisition Group is the only national business brokerage of its type comprised 100-percent of brokers who are CPAs with significant “Big Four” merger and acquisition experience. That’s why we’re able to negotiate brilliantly and deliver maximum value and the best terms when you sell your CPA practice. Contact us today to experience the Accounting Broker difference.


Let Accounting Broker Acquisition Group be the catalyst to enable your new future . . . without leaving money on the table!

Please Call Now: 1-800-419-1223 Ext. 21 . . . or Register Now!