You might also be interested in
Replies (3)
Please login or register to join the discussion.
M&A Market
Interesting article which raises some great questions. I'm very familiar with the US market, where the typical brokerage fee for the sale of a practice is in the region of 10% of the final sales price. The most common complaint I receive from CPA's is that they don't feel they are getting real value from their broker in the sales process. As in all walks of life there are good and not so good brokers. Good brokers that are experienced and are proactive in the sales process, overcoming the hurdles that always arise and driving the deal through to conclusion.
I'd imagine the same issues face UK firms looking for acquisition or exit strategies. What I can tell you from my experience in the US is that it is possible to buy and sell practices without a broker.
Dan Crowley
Founder: http://accountingpracticeexchange.com
Selling your practice
Thank you for your article. I am a broker of accountancy practices and I deal with all sizes of practices for sale. Prior to selling a practice I will ask the vendor two questions:- can you afford to sell and what will you do with your time when you have sold your fees. You will be surprised at the number of accountants that cannot afford to retire and give up work. My heart goes out to those that want to retire but have to stay on, they get more and more stressed and then end up with heart attacks or strokes. I have had to deal with widows where selling their husbands fees is the last thing they want to deal with but have to in order to get something from the practice. Industry norm is for a vendor to be paid in three tranches but we have will do deals where one off payments are made with no clawback, two payments are made with 12 months clawback, three payments are made with 2 years clawback, earn outs are made over a period of 4, 5 or even 6 months with negotiated clawback periods. As a broker I often find that the vendor has not sold before and so wants to understand how the process works and wants to know they are getting a good deal for their fees. Typically they will only ever sell their fees once so it is important to get a good commercial rate for the fee base. Sometimes the buyer has not bought before and they need hand holding through the process as well. I was once asked to define my ideal client and I said "a seller that says they want to sell and then does". We can have five offers for the one practice for sale and each will be entirely different. There is an increasing trend for vendors to keep some clients to work on from home after they have sold and so they have a continuing income that diminishes pver time as the clients retire or move away. The vendor is happy to sign a non compete clause. The average age of our vendors is increasing, ten years ago it was late 50's now it is late 60's and beyond. A good deal is one where the vendor is happy and the buyer is happy. Our fee is paid for the introduction of the buyer and seller and for monitoring and making sure the deal goes through. If a vendor goes direct to a buyer they do not know if they are getting a proper market rate for their fees. We take huge pride and effort in what we do for our vendors and our buyers.
One has to ask
Is it really worth the continuing cost o PII and Practising certificate to keep a few clients who may themselves retire within a relatively short time.
My advice to young accountants is to assume that there will be no proceeds from a sole practice on retirement and there invest sensibly for retirement during a working life.