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Buying a Practice - What are the Options?

2nd Dec 2020
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If you are looking to buy an accountancy practice then you will need to consider whether you are looking for an asset purchase or a share purchase.

There are pros and cons to both, and this article looks at what you might want to consider when deciding which is the best option for you.

As a buyer, if you are looking to secure an asset purchase the pros and cons are balanced. On the plus side you will be buying only selected assets, thereby detaching yourself from any liabilities the practice may have. The due diligence process should be a simpler process as you simply need to confirm that the assets (goodwill) you are purchasing are as stated in the contract. As a result, this type of purchase is a simpler legal process with less complicated contracts and less requirement for warranties and indemnities for unknown liabilities.

However, there are also some negatives to this type of purchase. Firstly, you are going to need to re- engage with all the clients and should be prepared for the work and effort you are going to have to put in to minimise the attrition rate. Secondly, you will need to establish new contracts with all the suppliers you want to keep working with and finally if you want to stay in the same location then you may have to take on an assignment of the existing lease or negotiate a new one, with possible guarantee demands, with the landlord.

If you don’t feel that an asset purchase is right for you then the alternative option is a share purchase. These can be a little more time consuming to complete but the advantages are that you take on a practice in its entirety. This means you will not have to re-engage with the clients, which should minimise attrition and if there are any employees you will take over their employment contracts and so there should be no TUPE issues.

But a share purchase isn’t all plain sailing, and you should remember that with this type of purchase you are taking on the entire history on the practice, including any liabilities for events that occurred under the seller's ownership. To negate these risk factors you should be prepared to undertake a very thorough due diligence process and you may even want to consider bringing in an independent third party to do this for you. You will also need to request Completion Accounts and ensure the seller leaves sufficient assets in the company bank account to cover any practice liabilities (Corporation Tax, PAYE, NIC and VAT) that occur up to completion. All this work will mean that the legal process is likely to be more complex than an asset purchase and therefore you will need to budget for higher legal costs.

Buying a practice can, at first glance, appear a little daunting, particularly if it’s your first time, but here at practicesales.co.uk we have plenty of experience and can offer help and advice to make your purchase go smoothly.

If you would like to talk to us about how we can help you make your next purchase the right purchase for you, then call us on 01823 756086 to discuss the opportunities currently available. Alternatively, if you have something specific in mind, we can help you find what you are looking for using our sophisticated database technology. Call now to find out how we can help you achieve your goals.

Editorial content supplied by Ian Worthington of Consilium 9 Limited.

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