A difficult case that has recently completed

We have recently completed a case that we started marketing in November 2018.  Yes, it has taken this long for it to go through.  The fees for sale were just below the half a million mark. 

The vendor started the process of selling at the end of 2018.  We sent out a mailer to potential buyers and some registered their interest.  We were able to set up meetings between the seller and three interested buyers.  But then the seller pulled out.  He decided it was not the right time for him to sell.  So we left it for him to contact us when he was ready.

He came back to us a year later and we asked him to update the information he had given us about his practice.  We sent out a new mailer.  The previous buyers were not interested because they had gone on to buy other fees and were busy integrating them into their own practices. 

We were fortunate enough to find some more buyers that wanted to meet with our vendor.  The fees had gone down a little but not so much that there was cause for concern.  This often happens when a vendor falls out of love with their work and do not have the energy or desire to continue building their business.

Three offers came in, one was chosen.  The next step was due diligence and here we came across a big stumbling block or should I say several stumbling blocks?  There had been no AML checks done.  No client engagement letters were on file.  Nothing was registered about GDPR.  Staff turnover was very high.  Subcontractors were keeping 80% of the fees charged to clients.  There were other matters that were a bit more serious but I will not go into that here.

The buyer decided that there were enough good clients amongst the fees for sale that it would still be worth while buying the accountancy practice.  But, the multiple was reduced quite considerably.  The vendor was upset about the reduction in what he was going to get but it was pointed out that any other buyer would be faced with the same problems if we were lucky enough to find another buyer.

The vendor kept changing his mind.  The buyer had been quoted a fee from the solicitor of £7,500 for the legal work to be done.  But by the end of the term the legal fees were in excess of £20k. Now at any point the buyer could have pulled out.  There was nothing stopping him from doing this.  But I think the buyer felt they were so deep into the buying the accountancy practice that they may as well continue.  Was that wise?  The buyer thought it was. 

Time will tell if the buyer made the right choice or not. 

If you want to discuss the possibility of selling your accountancy fees, then please get in touch.  Remember everything we discuss is confidential.  It is the buyer that pays our brokerage fee.  You can contact me, Nicola Draper, on 01788 816440 or email me at n.draper@draperhinks.co.uk