Accounting firms snapped up in £100m deal

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Private equity firm Sovereign Capital has acquired contractor services specialist SJD Accountancy and online accounting practice Nixon Williams in a deal worth more than £100m.

The new deal will see the combined group become a top 30 UK accountancy firm, bringing more consolidation to the mid-tier market. Sovereign Capital says the contractor services market is highly fragmented and it plans to expand with further acquisitions in the months ahead.

The two businesses will retain their brands and operate separately within the PE firm's portfolio, receiving the investment and support to further develop their offering.

Together the group's combined fee income will be £25m per annum, providing services to 18,000 limited company contractor clients across the UK.

SJD founder Simon Dolan has stepped down following the deal and will be involved in a consulting capacity for a period.

Jeremy Newman, current chair of the Audit Commission and former head of BDO International, joins as group chairman; while Kevin Budge, who previously completed the PE exit of Avelo FS to Iress, will become CFO.

Claire Johnson, the managing director of SJD, becomes group operations director, and former internet company executive Simon Curry has been named group chief executive.

Curry, the former chief executive of Powwownow and Plusnet, said: “Both SJD and Nixon Williams are excellent businesses, fully focused on providing clients with a highly efficient service; both businesses receive a significant number of referrals from existing clients and enjoy long term client relationships.

“The economic landscape has shown continued growth in the contractor market and we look forward to building upon the pace of growth these businesses have achieved,” he added.

SJD Accountancy was founded in 1992 by entrepreneur Simon Dolan, and has since become the largest accountancy provider to the contractor market.

Nixon Williams was established in 1995 by Alan Williams and Andy Nixon, and has also experienced strong growth in the IT contractor market.

Sovereign Capital is a UK-based private equity 'Buy & Build' specialist with specific expertise in the service based sectors of business support services, healthcare, education and training.

About Robert Lovell

Business and finance journalist

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    avatar
    22nd Sep 2014 17:12

    This all seems a little strange. 4 * Gross fees is a massive amount and does not seem justified by brand or any other intangibles (unless they hope to soak the 18,000 contractors for fees).

    I also don't get the point of purchasing the two firms but then operating them as separate brands.

     

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    22nd Sep 2014 17:56

    I thought the same...

    I do £2.5m, if they want to give me £10m, I'm outta here.

    Ive never heard of x4 fees. Tenon at its hight paid x2 and look what happened there.

    Will be very interested to watch this over the next few years

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    22nd Sep 2014 18:01

    Don't believe everything you read

    etc

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    22nd Sep 2014 20:14

    Business not practice

    Could the value be based on profit rather that GRF because it's a business rather than a practice?

    Bob Harper

    The More Partnership and Crunchers

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    22nd Sep 2014 21:51

    Like others have said
    I don't get the numbers. Although is a deal worth £100m the same as paying £100m for the business.

    A bit like when a footballer is sold in a deal worth £25m but that includes 5 years of his salary.

    If the company generates 40% EBITDA that's 10 times its profits as the multiplier which seems excessive. Although I have never understood how Internet businesses are valued such as Facebook etc be keen to see a follow up article with a bit meat on the bones of the detail

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    22nd Sep 2014 22:03

    Good point

    Glennzy wrote:
    I don't get the numbers. Although is a deal worth £100m the same as paying £100m for the business.

    A bit like when a footballer is sold in a deal worth £25m but that includes 5 years of his salary.

    If the company generates 40% EBITDA that's 10 times its profits as the multiplier which seems excessive. Although I have never understood how Internet businesses are valued such as Facebook etc be keen to see a follow up article with a bit meat on the bones of the detail

    You raise a very interesting point. If this includes (say) a five year retention deal with challenging revenue targets I could see it just about stretching to £100m if the figure includes contracted payments to senior management.

    An utterly meaningless £100m it would be, but still £100m.

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    23rd Sep 2014 08:54

    .

    At face value that is a hell of a lot of cash.

     

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    By jford
    23rd Sep 2014 11:49

    Sleepless nights

    I'm not sure any debate about multiples will keep Mr Dolan awake at night.  And why should it either.  He's built a good business and sold it for a tidy sum.  Good for him.

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    23rd Sep 2014 15:03

    Sleepless nights #2

    jford wrote:

    I'm not sure any debate about multiples will keep Mr Dolan awake at night.  And why should it either.  He's built a good business and sold it for a tidy sum.  Good for him.

     

    Quite right! Why the hell not- it will certainly help keep the racing cars going for while. Good on 'im.

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    23rd Sep 2014 12:04

    Added value services

    I expect they will now try and bolt on all sorts of services to sell to the luckless 18,000 clients who have been passed on.  Most won't even notice as it's mostly automated anyway.  Even then, £100m seems very high and there must be all sorts of clauses and caveats on targets etc for that figure to reach.

    Congratulations to Simon for extracting such a high price for his business, is it retirement now or you starting another business?

    I'd happily take on 20 or 30 of those clients if they want a more personalised service for the £130 or so a month SJD charge (shameless I am!).

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    23rd Sep 2014 12:15

    Good luck to him

    I agree with jford, I've taken an interest in his business for years and he has built a great business with a personalised service for his clients.

     

    I think he sold at the right time though because is you look at his growth figure on the last top 100 firm publication he only grew 5% which is down sharply from all prior years, probably due to lots more competition in the form of remote services.

     

    Sure we haven't heard the last from Simon!

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    By Swills
    23rd Sep 2014 16:12

    Price

    The price quoted will undoubtedly include a war chest to make further acquisitions. I doubt very much it is the price paid for the businesses in question.

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    By GazCol
    24th Sep 2014 14:03

    I expect, as others have said, the valuation is based on profit, not fees as it's a different beast to buying a 'normal' practice. I also expect that Sovereign Capital know something we don't that could lead to a huge increase in the size of their market and I'm guessing that that isn't HMRC clamping down further on IR35.

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    01st Oct 2014 10:02

    Private equity

    I have not heard the term 'Private equity' for around 6 years now, I thought private equity firms had gone the same way as black and white TV's, loose leaf tea and button up boots, how wrong can i be.

     

    Where did they get £100 million pounds from, an accounting mate of mine had a client who could get a loan for 10,000.

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    02nd Oct 2014 07:27

    Well, you can believe what you read, and yes, 4 times fees is the most I believe ever paid for a practice by quite some margin. But then again SJD was never a traditional practice, hence it wasn't sold for a traditional valuation. I've been saying for years that the "how to build a great practice " type organisations were totally missing the point, but hey, what do I know.....

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