More on buying and selling companies

Apr 07, 2024

Exploring common questions – and their answers – from firm leaders about the buying and selling process.

Because there is so much interest in buying and selling AEC firms, I thought I would go into some typical questions I hear from buyers and sellers, and give our readers some answers to them.

Let’s get right into it!

  • “If we want to buy another firm, what are some sources of financing?” Your first place to look for acquisition capital is always to the sellers to finance as much as possible of the deal. That will ensure that they are working to help you make the deal work out because their payment is dependent on it. But other sources of potential acquisition capital include the assets of the selling firm, namely their accounts receivable. The day the deal goes down, those are yours as the buyer (IF they were included in the sale) – and you can borrow against them. Another source of financing is an SBA loan. They can have extended terms and don’t need to be refinanced every so often like a typical bank commercial note would have to be.
  • “What do you think about earnouts?” I am not a fan of profit-based earnouts and never have been for many reasons. Most importantly because they discourage integration and resource sharing between the acquired company and the acquiring company. The selling company won’t want to share its clients, projects, or people with the buyer because that could impact their earnout. Not good. And they frequently lead to disputes about corporate overhead allocations and more. That said, I do like commissions based on work coming from clients of the selling firm for a period of time after the deal closes. The work could be sold by either the selling company or the buying company, and done by either. It’s easy to account for it this way and does not discourage cooperation.
  • “Isn’t cultural compatibility the most important aspect to look for when acquiring another firm?” Many of those who have done a lot of deals will tell you that cultural compatibility is overrated. The late Jerry Allen who was CEO of Carter & Burgess when they were out buying companies said more than once that his definition of “cultural compatibility” was a very short payback period. His philosophy on buying companies was to buy troubled ones that needed help, “because they were cheap and their employees were glad to see you.” That said, a well-written agreement and shared expectations of what is to come are most important for deals to ultimately work out.
  • “As a buyer, how can we avoid inadvertently taking on hidden liabilities that the seller has?” You structure the deal as an asset purchase versus a stock purchase, and you clearly spell out in your agreement what assets and what liabilities you are assuming as the buyer. Any that are not on the list remain with the seller.
  • “Why shouldn’t we use our regular business attorney to hammer out the details of our firm purchase or sale?” Because your regular business attorney probably doesn’t have a lot of experience in buying and selling AEC firms, and that is what you really need because these transactions are fraught with peril. Not only do you need an attorney who is specialized in M&A, ideally you need someone who has done deals specifically in our industry.
  • “How do we get our key people to stick around after we sell our business?” One of the best methods companies use is retention bonuses. The key people have to stick around so long (tied to the expiration of the warrants and representations) to get their money. Yes, most of the time, these are not paid by the buyers and instead have to be paid out of the owners’ proceeds. But it may be money well-spent and keep the buyer from clawing back at you down the road to get some of their money back. 

Mark Zweig is Zweig Group’s chairman and founder. Contact him at

About Zweig Group

Zweig Group, three times on the Inc. 500/5000 list, is the industry leader and premiere authority in AEC firm management and marketing, the go-to source for data and research, and the leading provider of customized learning and training. Zweig Group exists to help AEC firms succeed in a complicated and challenging marketplace through services that include: Mergers & Acquisitions, Strategic Planning, Valuation, Executive Search, Board of Director Services, Ownership Transition, Marketing & Branding, and Business Development Training. The firm has offices in Dallas and Fayetteville, Arkansas.