We all know that Making Tax Digital has been delayed because of the general election for at least a year. Many accountants would say that it would be good if it could be scrapped completely but that is unlikely to happen.
MTD has had a significant impact on the market place and as a broker I have noticed that we have had an influx of sellers not wanting to have to deal with it. Initially this caused a downward pressure on multiples and I was warning sellers that they would get far less for their practice if they were to put it on the market earlier this year.
Interestingly, there has been a corresponding influx of buyers on to the market. There has been a number of firms showing an interest in purchasing fees that perhaps would not have thought of doing so this time last year. The result of this has resulted in there being a very buoyant market place. Accountancy practices are being sold. Buyers are chasing us to find out when we will be selling the next accountancy practice.
In the last couple of weeks we worked with a vendor looking to sell his fees and he met with five interested parties all of whom wanted to put in an offer. The highest multiple offered was above the industry average of 1 x fees at 1.1x fees. He has asked us to go back to the buyers that offered a lower multiple and has asked them to amend their offers upwards. We are still working on this case and we believe that the vendor will get a really good deal that he will be happy with. This was certainly not our experience at the start of the year.
We are currently working with another accountant who wanted to downsize and sell a tranche of fees. He was having difficulty recruiting and was being put under more and more pressure with the ever increasing work load. After speaking to Draper Hinks about selling his accountancy fees, he decided to sell off around 33% of his fee base and keep the rest. His biggest decision was which clients to sell. Each time he went through his client list he found reasons to keep the clients and not sell them. Eventually he came up with a list that he was happy to sell.
We went to market and found three buyers for him. Each one was interested in buying the fees. During each meeting he explained that his aim was to fully retire in 2 – 3 years time so there was going to be the possibility of more fees being sold in future. All three buyers put in an offer. All buyers said they would be happy to take on all the fees when they became available. He is currently considering whether or not to sell all of his practice by splitting into three tranches and selling a third to each buyer.
By doing this he will retire earlier than planned. But this is attractive to him because his prime motivator is to reduce his level of stress. All buyers are happy to proceed on this basis. The multiple offered is not any higher selling this way. Perhaps you could say he is hedging his bets by having three buyers taking on a third each instead of one buyer taking on all of it.
With only one buyer there is the chance they will pull out during the negotiations, but with three buyers there is more chance he will get paid well by at least one, more likely two but ideally three buyers. He has many other business interests he wants to follow. By working with Draper Hinks he has opened up many different options.
Don’t assume you have to sell all of your accountancy practice. You can sell tranches of fees to buyers. If you want to discuss this in more detail then contact us and we will be happy to run through the different options available to you.
Remember, the market place is buoyant. Borrowing is cheap. Sellers and buyers are out there. Contact us if you want to sell your accountancy practice or if you want to buy an accountancy practice. We have a lot of experience and can help you to get a good price for your fees.
If you want to know more about how to buy or sell an accountancy practice then contact Nicola Draper on 01788 816440 or email her at firstname.lastname@example.org.
Please remember everything discussed will be kept in the strictest of confidence.