Anyone making an investment of any kind wants to have a return. Buyers of accountancy practices are no different. There are several common things a buyer needs to take into account when looking to buy accountancy fees.
If a vendor has staff that have been in the practice for a long time ie 25 – 30 years, under TUPE regulations, the buyer has to be careful with regards to continuity of service for those staff, the buyer is looking to take on post sale. Some buyers are very concerned about the implications to them of the continuity of service. In one case we worked on the vendor insisted the buyer took on all the staff post sale. The buyer worked out that if he had to make all the staff redundant because they could not work with his systems then it would cost him over £80,000. So assuming the responsibility for the vendor’s staff can be a stumbling block or even a deal breaker.
Another problem a buyer can inherit is the competency of the staff. Sellers generally do not know how competent their staff are, they have no benchmark. They know the work gets done within a time frame. Problems can arrive both pre and post-sale when the ability of the staff is reviewed. A buyer will look at the hours done by the staff and the amount of the turnover. We had a case where the cost of the staff equalled the turnover. You could argue that this was not an efficiently run practice (I don’t think anyone would argue) but we still found a buyer and managed to sell it.
If the buyer is taking on a large amount of fees ie in excess of £750k then it would be expected that the buyer interview key members of staff before completion. This then causes problems with keeping the deal confidential. Sellers can be very sensitive about this but a buyer will need to satisfy themselves that the staff are competent and capable of doing the job.
Buyers need to be mindful of what rate the vendor charges the clients. If the fees are undercharged and below market rate it can be hard for the buyer to make a profit. Also buyers need to be mindful of the number of free cases or pro-bono work done by the vendor. We have come across a number of vendors that have historic cases where clients are not charged but it is important the buyer makes sure to quantify the number of clients and the amount being given away. The buyer is under no obligation to continue with this practice so be careful if taking them on. The buyer may have to increase their fees to make ends meet which will have an impact on the retention of the client base.
Holidays can cause problems when trying to buy a practice especially over the summer months. We try very hard at Draper Hinks to keep on top of who is on holiday, when they get back and how, if at all, we can contact them whilst away. We have to be incredibly careful not to email someone at their work if they are on holiday where the staff are dealing with all emails in their absence. Phone calls at the office are also out of the question. We tend to communicate using private emails, spouse’s email, text or spouse’s text. Whichever method we have to use we will, to make sure everything remains confidential. Some vendors will let their staff know that they are thinking of selling their fees, so the holiday season is not an issue, but this is unusual.
We have lots of experience with selling and buying accountancy practices at any time of year, so we know what we are talking about. If you are thinking of selling your fees or if you want to buy fees then please contact me, Nicola Draper on 01788 816440 or email me at firstname.lastname@example.org. Please remember everything discussed will be kept in the strictest of confidence.