We have had a number of vendors approach us this year not wanting to have to deal with MTD. Their sole purpose of selling was to avoid having to put things in place to deal with yet another system to be compliant in the ever changing world of accountancy. The first practice we marketed this year was for a lady, sole practitioner, who did not want to have to explain to clients what MTD meant and how it would affect them. She approached us in January and on Monday 5th February we marketed her practice. We managed to get her two offers, she accepted one and she completed the deal on the 2nd May.
The first offer was at a multiple of 0.9 x fees paid 50% on completion and 50% after 6 months. The second offer was at a multiple of 1 x fees paid 50% on completion, 40% after 12 months and 10% after 18 months. She decided to accept the first offer, mainly due to the shortened payment term.
We then had a number of other vendors wanting to do the same, but far fewer than expected. Then there was a lull over Easter. Now that the summer holidays are nearly over we are finding more accountants are approaching us to sell their practices before April 2019. Some are just tired and fed up and don’t want to do it anymore. Some say it is because of ill health, a significant birthday or anniversary and others because of MTD. Where is the tsunami of vendors we all expected? I think a lot of them were flushed out last year.
Not all practices can be sold. Some vendors in their 70’s have clients of a similar age to themselves. They are often disinclined to increase their fees making a bigger and bigger discrepancy between their rates and market rates for work done. We cannot sell a practice if the vendor charges too low an amount. Buyers say they will have to increase the fees (sometimes to more than double) clients will not like it and leave. So buyers pull out.
I had predicted a wave of vendors flooding the market but this has not been our experience (yet). We seem to have had the normal busy period at the beginning of the year but we have been able to manage the steady work load and have yet to be inundated with frantic vendors. Perhaps we will have that joy after January next year? Many accountancy firms are employing or having a tie up with book keepers to help with the introduction of MTD. Clients will have to become more aware of what needs to be done. The sophistication of clients will start to have an effect on the saleability of the practice.
February, March, April and May are always very busy for us. As is September. If you are thinking of selling or buying before MTD starts, and have not registered with us, then let us know. We want to hear from you. To contact Draper Hinks to discuss your situation in confidence, then please let me know and email me, Nicola Draper, at firstname.lastname@example.org. I look forward to hearing from you