We were contacted by a vendor three years ago to discuss the possibility of selling his practice with fees in the region of £160,000. Due to mitigating circumstances, we decided it was best to meet up face to face to discuss his particular situation, so a convenient time and place was agreed.
I drove to the meeting and he drove to the meeting and we ended up having a coffee and a chat. The reason he wanted a face to face meeting was that he wanted to sell his accountancy practice due to a (serious) health condition that was going to deteriorate over time and he didn’t want anyone to know how unwell he really was. Although able to deal with the current work load he knew it would get too much for him in the near future.
Post completion, he was looking to work with the buyer for a couple of years on a time diminishing scale to ease himself out of the practice. The truth of the matter was that he wasn’t expecting to have to give up work when in his early fifties and he needed to continue to earn an income, despite not being well enough to do so.
We followed our normal process for selling his accountancy practice. We set up meetings with potential buyers, offers were made, one offer was accepted, due diligence was carried out, contracts were signed and exchanged and the first tranche of money was paid. All looking good. Then a year later when the second of the three tranches was due to be paid problems started to occur. The buyer refused to pay the second tranche on the basis that he, the buyer, was not made aware of the medical condition of the vendor and said he had been misled. The buyer was being difficult and the vendor was most upset.
What the buyer had not catered for was that I had attended the first meeting between him and seller, at the specific request of the vendor, and had the notes to say the vendor had told the buyer of his medical condition and his deteriorating health. So I could prove that the buyer had been informed. The vendor ended up threatening, but not actually, taking the buyer to court. Eventually money was paid and the vendor was able to relax.
A year later when the third tranche of money was due to be paid the vendor was in a frail state of health and the buyer flatly refused to pay out any money due. The buyer stated that the accounts shown to him during the due diligence over two years prior to this date were false and fabricated. The vendor refuted all allegations. The WIP that was agreed to be paid post completion was still being argued over. In fact everything was totally unsatisfactory from the vendor’s point of view. I was asked to get involved again and was able to confirm to the vendor that the buyer had agreed to pay the WIP and what the amount of the WIP was.
As brokers we don’t normally get involved post completion but I wanted to help the vendor out as much as possible. So I went back over all the email exchanges from two years previously, all 120 of them, and was able to corroborate what the vendor was due to be paid.
Unfortunately in August of this year the buyer’s practice was put into administration and although it appeared on the assets summary that there was sufficient funds to pay the third tranche to the vendor (less clawback) he has not seen a penny of it. The most upsetting part of all of this is that the Joint Administrators’ Post Appointment fee was just shy of £70k.
Moral of the story is that you have to be really really careful who you sell your practice to. I don’t think there was any way in which this situation could have been prevented. We try our best for our vendors and our buyers. Please note this is a very unusual case and most cases we deal with go through without a hitch. Don’t be put off by this situation, if you want to sell your practice then work with us. We will be there through thick and thin and do what we can to help you get what is right for you.
Please email me at n.draper@draperhinks if you want to discuss your situation in confidence. I look forward to hearing from you.