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Season’s Greetings. I’m Nicola Draper, I run Draper Hinks, a business brokerage facilitating the buying and selling of accountancy practices. We have completed over 448 deals to date and look forward to doing many more. |
Nicola DraperLeaving things to the last minute
Why is it that this year we have had more than our fair share of vendors that have been seriously ill needing to sell in a hurry.
You are accountants. A practice for sale is a valuable asset that can be sold. Where a vendor has to sell because of ill health, time is always of the essence. The shorter the time period between for sale and sold, the greater the downward pressure on the multiple. As buyers you have to be very understanding of the situation and will still need to do due diligence prior to completion. Please refrain from doing an in-depth due diligence. It should only be a light touch, especially where you have agreed to buy at a significantly reduced multiple. Without the physical and mental capacity to sign off on a practice sale, a buyer may find they are not able to complete. This will differ from case to case. Always get professional advice if you are in this position. Don’t assume there is nothing that can be done.
Round up of 2024 and Market Commentary
Draper Hinks has had a good year. We can finally say we have bounced back from the effects of Covid where we lost over 85% of our business overnight. Things are looking much brighter.
My main observations as to what trends are becoming more prominent are several. We are still working with vendors that have paper-based practices. This is something that some buyers will not entertain. The cost of having to scan all paperwork into the system can make a profitable proposition turn into one that would cost money. This is becoming more of an issue.
Some vendors have an office where the staff work, and clients come in to meet their adviser. Not all buyers have offices, many people have staff working from home. There are pros and cons to this, but if a vendor has an office, they would normally want the buyer to take it on, at least for a short period, post-sale in order to help with retention. Obviously, this depends on many factors, the main ones being the size of the practice being sold, the location of the office and cost.
We have had a plethora of buyers coming to us wanting to buy a number of accountancy practices in the immediate future. The buyers are often backed by investors who can see that the return of their investment has the potential to be significant. However, having money in the bank does not mean there will be any practices for sale in the area you are looking, with the amount of turnover you want, with the profitability you would expect, without being over-staffed and under charging. It is easy to do a calculation on a piece of paper showing that buying a number of accountancy practices over a short period of time and then selling the resultant “empire” looks good financially. But you have to remember that fundamentally accountancy is about relationships with clients and not just numbers. Vendors do not like to sell to larger organisations looking to make a quick profit.
Thank you again to all that have done business with Draper Hinks in 2024, and we look forward to working with those that haven’t yet.
Nicola Draper – Managing Director
Income Multiples Paid in the last 12 months
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2023 |
Quarter |
Average income multiple paid |
Lowest income multiple paid |
Highest income multiple paid |
Lowest income multiple offered |
Highest income multiple offered |
|
Quarter 4 |
Oct – Dec |
0.918 |
0.35* |
1.10 |
0.35 |
1.10 |
|
2024 |
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Quarter 1 |
Jan – Mar |
1.05 |
1.00 |
1.20 |
0.85 |
1.20 |
|
Quarter 2 |
Apr – Jun |
0.998 |
0.80 |
1.13 |
0.65 |
1.20 |
|
Quarter 3 |
Jul – Sept |
1.063 |
0.85 |
1.20 |
0.70 |
1.25 |
*This deal completed in less than two weeks due to the terminal illness of the vendor.
NB None of the above figures are to be reproduced in any way without express permission from Nicola Draper.
