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Mid sized practices on acquisition sprees

Has it always been the way?

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The larger regional practices in my area are on a spending spree at the moment, smaller and larger practices being taken over, spoke to a friend who said it was the same in his area too.

We have both received many emails from larger firms offering to buy our practice or clients with very good terms, flexible etc.

It is working out okay for us as we've had a fair few clients who have left the larger firm to go back to a smaller player.

Has the industry always been like this? Or is it hotting up. I don't really see the need for consolidation in the industry or that there are major economies of scale to be had.

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By Maslins
15th Jul 2019 13:35

I guess when interest rates are low, bigger firms with spare cash decide to try to expand rather than sit on the savings.

Perhaps also with things like MTD & Brexit there may be a lot of nervous small practitioners who just want out.

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15th Jul 2019 15:23

Baldwins seem to have bought most of the mid tier firms of note in the North East.

As you say the fall out helps us as their smaller clients get priced out and come to us and make decent clients.

At the lower end of the scale MTD seems to have brought on a few retirement sales.

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15th Jul 2019 16:41

The first instance I remember of this was Levy Gee in the 1980's.

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By Maslins
to Red Leader
19th Jul 2019 11:17

I trained with Tenon 13-15 years ago. Enjoyed my time there. Tenon kinda laughed at Vantis (another "consolidator" firm) when they went bust, then Tenon went bust a few years later.

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19th Jul 2019 10:44

Pricing at 1 x annual turnover (or even 1.25) I don't (as a sole practitioner) understand the attraction of selling . Are these multiples still being offered?

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to Ian Lawrence
19th Jul 2019 11:10

I do! Aged 60 with £500k, in the bank, is enough to retire on (or at least take life at a slower speed).

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to Ian Lawrence
19th Jul 2019 12:27

Pretty normal multiples. If you're planning on getting more when you do eventually sell up, you may be disappointed.

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19th Jul 2019 11:15

This acquisition spree isn’t just limited to the mid market. Many small <£1m firms are acquiring much smaller firms as a result of MTD . I know of a number of such firms that have completed multiple transactions in the last 12 months

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By GR
19th Jul 2019 17:03

Contractor firms seem to be on a spending spree at the moment. These firms are generally valued at 2x turnover.

Sovreign capital bought SJD (15,000 clients) and Nixon Williams (5,000 clients) around 4 years ago for £100M.

Clearsky Accounting then bought SJD and Nixon Williams around 2 years ago.

SJD bought First Freelance (probably around 1,000 clients) for £4.2M.

Brooksons accounting recently bought 1st option accounting and intouch accounting.

JSA Accounting Services has recently bought K&B Accountancy Group (around 1,000 clients) making that transaction their 7th acquisition in that last 4 years.

I'm surprised Maslins hasn't sold up!

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to GR
19th Jul 2019 17:34

Why do contractor firms value at 2 x revenue ?

I thought they would be lower as IR35 is always in the headlights of HMRC and they could be decimated at any point

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