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Pincer movement set to squeeze practice valuations higher

As practice sale enquiries increase, Norman Younger sees some very big changes heading into the marketplace in terms of valuation and funding.

15th Feb 2021
Director Maximiti Limited
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Smart businessman looking forward in spyglass
istock_spyglass_Feodora Chiosea

Remember your first economics lesson? The supply and demand curve, supposedly an immutable fundamental of every market. A notable exception is in accountancy practices where the multiple paid has stuck around between 0.9x and 1.2x for a number of years in spite of demand outstripping supply, in many places by a significant amount. 

Ordinarily one would expect to see prices climb steadily. But that hasn't happened. Until now.

During Covid there has been what economists would describe as a supply-side shock. Many practitioners were so busy helping clients navigate the myriad support schemes or reinvent their businesses that any thoughts of selling up were quickly kicked into the long grass.

It got me thinking – how long can the imbalance of supply and demand coupled with a dearth of opportunities last without multiples rising? I think the answer has arrived.

Private equity

Buyers have quickly become acutely aware of this and instead of sitting and waiting for something to come along they know that they are going to have to dig deeper into their pockets or formulate plan B.

Private equity has been circling the profession in recent years but now there are new entrants who are willing to go the extra mile to muscle in. These new kids on the block are smaller and more loosely structured imar dig0s,ar,who were

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