Looking to buy a practice
Hi there,
We are a small practice looking to expand through acquisition of another practice (c. £300-400k GRF).
We are looking for any advice and tips those with experience of purchasing have.
One thing I noticed is that a lot of purchasing guides talk of multiples on GRF. However, the margins on some of these businesses are so different. What is a realistic EBITDA multiple we should expect?
Also - is it typical to stagger the payments to the vendor - based on number of clients that stay/leave?
Further, brokers seem to charge a lot - 5% to each side.
We would prefer to purchase through private acquisition.
So..if there is anybody looking to sell, please do contact me.
We are based in West London, but are open to purchase more Central London and perhaps further out to the Western Home Counties..
Thanks
Gurpreet
Have a look at a previous post
Hi - there was a similar question back in November per link, with a lot of good feedback. As you will see my primary approach is due diligence, ie get to know how the accountant worked with key clients and judge what differences & changes will be needed to work with you.
In my experience, you'll be lucky to get the 2 year "stay with" discount mentioned by SJRUK. As & when I come to sell (not long now!) there's too much that a new firm can cock up in two years and so I'd make it 6 months. At least that would force you to get to know the clients and not just sit back and wait for the tax return in a year's time.
I'm sure it might happen in some deals but I've never heard of a profit multiplier being used, it's the clients' fee you are buying, the profit you earn is up to you and so would not be of interest to the seller.
As SJRUK mentioned many private deals are done however, if you don't want to hang around for months waiting to find a contact, brokers are there to make it work properly on both sides and so the fee can be worthwhile.
Not sure of the success rate but you can post on the Opportunities section above.
Good Luck
My experience
Our practice has just bought some fees off someone who's retired. On a much tinier scale than you are talking about (£30K gross fees).
We've agreed to pay him 1x the gross fees of the clients that actually came to us. We paid something like 1/3rd up front, 1/3rd after the first year and the balance after the 2nd year. The 2nd and final payments are recalculated on the basis of which clients stay with us.
One thing I would do differently is to look at the clients much closer as the fees he was charging were much lower than our charges - so we do expect some clients to walk.
He came to us via word and mouth - being an acquintance of a partner.
In fact there are about three different people having asked us to purchase off them when they retire - all through contacts. So its worth letting colleagues know you are in the market.