Some buyers put in multiple offers for the same practice

We have been selling accountancy practices for over 20 years, so we know a thing or two about the process, what is reasonable and what is not.   Most sellers of accountancy practices have not sold before.  Believe it or not there are some accountants that sell their fees and then get bored, start again and then in a few years’ time they sell again.  Other vendors may sell a tranche of fees and downsize gradually, selling a tranche every 2 – 3 years. 

There are many things that constitute an offer.  It is a fallacy that you only have to put in one offer for a practice you want to buy.  Accountants are very good at coming up with lots of different scenarios for how to buy a practice.  If we have four buyers for the same practice and each has put in an offer, you can bet that each offer will be different.  There is no right or wrong.  The buyer will assess the risk to them, weigh up what current funding they may have vs what funding they may need, do they need to move to new premises to accommodate the influx of fees and possibly new members of staff etc, etc.  So, each deal is very different. 

The basic structure of a deal includes:-

  • What payments will be paid and when.
  • What the multiple will be.
  • How clawback will work.

Industry average is a third paid on completion, a third paid at the end of 12 months and a third paid at the end of 24 months subject to clawback.  The multiple paid will be dependent on where the practice is and what the turnover is.  A practice is more likely to sell if it is located near other accountancy firms.  Any practice in a rural area has a harder time of finding a buyer.  A larger practice will have fewer firms interested in it.  Stands to reason.  There is a smaller pool of potential buyers to fish from.

Clawback usually works on the basis that if a client leaves during the payment term the subsequent payment to the vendor is reduced.  So, where there are three payments over two years and a client leaves in the first year with no work being done for that client, the second payment will be reduced by the amount of the fee lost at the multiple paid.  If a client leaves in the second year of the payment period, the third and final payment is reduced. 

It would be expected that a longer payment term would warrant a higher multiple.   This could look a bit like:-

  • 2 payments over 12 months, multiple of 1 x fees.
  • 3 payments over 24 months, multiple of 1.25 x fees.
  • 4 payments over 26 months, multiple of 1.3 x fees.

All of this depends on what the buyer’s apparent risk is, how they want to structure the deal and how large the practice is that they are looking to buy.

Then you have to decide the amount of each tranche payment.  Let’s assume you want to put in an offer of three payments over two years do you offer:-

  • 33.33% on completion,  33.33% after 12 months and 33.33% after 24 months?
  • 40% on completion, 35% after 12 months and 25% after 24 months?
  • 50% on completion, 25% after 12 months and 25% after 24 months?

There are obviously many different ways in which you can structure a deal but most vendors will want the payments to be front-end loaded, so keep that in mind. 

There are so many variables to take into account when putting in an offer, it pays to take advice from a seasoned broker.  I would be happy to discuss all the options to find what would be best for you, together we can come up with something that will be right for you.  That being the case, please get in touch with me, Nicola Draper, on 01788 816440 or email me at or book a confidential appointment using this link  Let’s talk.