Vendors Beware – An initial offer may not be the final offer

In Spring of last year we started marketing a practice in the North West of England.  It was a general practice with turnover of £225,000.  The fees were primarily compliance so it was deemed to be all Gross Recurring Fees (GRF). 

We sent out a mailer to buyers in the area, posted it on our website and dropped it into our closed LinkedIn Group for buyers.  We do this for all the accountancy practices we sell as a matter of course.  We had some interest from buyers and set up three meetings for the vendor on the meeting day.

From this meeting day we got one good offer.  1 x fees, paid in three tranches, first on completion, the second at the end of 12 months and the third at the end of 24 months.  The second and third payments were subject to client retention.  The first payment was for 40% ie £90,000 and the second and third payments were for 30% respectively.

Vendors need to remember that all offers are indicative offers and are subject to due diligence.  The date was set for the due diligence to take place and it was subsequently carried out. At Draper Hinks we like to track the progress of the sale, so we contacted the buyer to see how the meeting had gone and was told that they were having second thoughts about buying the fees at the price originally stated.  The buyer decided to reduce the offer to 0.8 x fees.  So, the vendor was facing a reduction of £45,000.

The reasons given by the buyer were as follows:-

  • There was a high percentage of clients nearing retirement.
  • There was a high level of low value clients, which would result in a low retention rate.
  • The vast majority of clients had not been brought up to date with technology and most files were paper based, necessitating a considerable amount of up front date entry work on behalf of the buyer.
  • The existing staff were being paid far beyond market rate for the work they did.
  • The vendor was not involved on a day to day basis, making the buyer feel that there was a greater chance of clients leaving post sale.

Naturally the vendor was very upset with this change in offer and did not accept the reasons given by the buyer.  As a consequence the vendor took the practice off the market and has since decided to continue working with the client base.  The vendor will downsize organically as the clients move away, retire, go out of business or die.  The vendor had other options but chose not to follow them. 

Our door is always open to help you in any way we can.  So, please remember if you are thinking of selling your accountancy fees, then contact me, Nicola Draper on 01788 816440 or email me at  Let’s have a chat and see how we can help you to get what you want.  Come and meet with me in our office in Rugby. 

Remember everything discussed will be kept in the strictest of confidence.