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Accountancy News

Read all the latest accountancy practice news from Morgan Cox Accountancy. We specialist accountancy practice consultants and provide acquisition and exit plan solutions for accountants in the United Kingdom.
Developing a business strategy can be difficult particularly when it relates to the accountancy market. Making it work can sometimes prove even harder. In our November's accountancy news blog we interviewed in detail some of the brokers at Morgan Cox Accountancy who have an in depth knowledge of the accountancy practice sales market place in the United Kingdom.
Here was the question we put to the team:

Can you provide a brief summary of the market place (November 2012) so that we can tell all those practice partners or owners who are appraising the market what is currently happening?
Is it currently a buyers or sellers market?

One of the Brokers at Morgan Cox Accountancy summarised the current market situation:
"It’s a competitive process and for every practice we take to the market at present we have over 300 buyers who are waiting. Buyers don't realise this and sometimes try to perform an acquisition by the book, however my advice would be to act quickly and be as flexible and accommodating as possible in view of it being a sellers market"

It's probably not news to many of you in the market at the moment, but it's definitely a sellers market. There is an increasing demand for any type of practice and those that do come to the market receive a lot of interest from potential buyers. Mid sized practices don’t come to the market very often, and when they do there is always a lot of interest and they go for the upper end of what you may consider a market going GFR multiple.

Recently Morgan Cox Accountancy introduced around 9 companies to a single practice in a 2 week period. Last month they marketed a £400,000 GRF practice, introduced 11 parties and sold it for a 1.25 multiple in 3 weeks. The partner who bought it had been looking for 2 years and had been piped at the post on several occasions by buyers who had more to offer the vendor. This time, he had financing in order, met the vendor within 2 days, conducted due diligence at the practice the week after. Within 2 weeks he had exclusivity on the practice only through signing the heads of terms agreement and all was passed onto the lawyers. The purchaser knew the market and reacted accordingly. He was well positioned, had an acquisition strategy and had unique and attractive proposition that at the end of the day, got the vendors attention over the other interested purchasers. 2 days later we received 2 calls from buyers who had enquired about the practice. They had been called by the practice owner and wanted to know what was slowing things down. Unfortunately the deal had already been done by a more sophisticated, prepared and determined buyer.

Buyers in the London and Home Counties areas are finding the market quite competitive. There is a large number of smaller firms operating in this area and many of them are trying to grow through the acquisition route. Within the London area, Morgan Cox have practices phoning them up on a weekly desperate to acquire. One is willing to front load the first payment to the tune of 70% of the total transaction cost and offer to keep on the vendor in a salaried consultancy role (if requested) just as a sweetener to win over the vendor from other parties. It’s that competitive.
What does the future hold for 2013? Without wanting to break bad news to the many buyers out there that are currently looking, Morgan Cox Accountancy have posted this exact question on their accountancy community board. It would be interesting to see what your predictions are?

Some top tips for those thinking of enquiring an accountancy practice:
  • Have an acquisition strategy including possible locations, type of fees and maximum expenditure for this acquisition
  • Work out what you may be prepared to offer both based on a GRF multiple and also other incentives. Be creative
  • Ask yourself what your unique selling point is? Vendors will currently expect to receive more than 1 offer. Why is your better?
  • Register with the best accountancy practice brokers- Morgan Cox Accountancy comes highly recommended
  • Use social media. Like or follow, the brokers social media. Trends in the market will soon be picked up. You can adjust your strategy immediately based on market changes and alterations in the supply/demand equation
  • Act quickly
  • Be flexible
  • Be nice. Business doesn't need to be stressful. When a vendor was asked why he chose one offer over another his response was "I want to do business with nice people. First impressions count and he was very hospitable when we met".....
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Try the Morgan Cox Accountancy Practice Challenge!

Outcome: An accountant selling her practice lands an additional £80,000

Case Report:
In June this year we received an interesting call from an accountant who was selling her accountancy practice. She was based in the home counties around London and had a good network of fellow accountants whom she approached to float the idea of selling her accountancy practice. Like most vendors who attempt to sell themselves she made quite a few mistakes but in the end she called Morgan Cox Accountancy and ended up landing a cheque for £80,000 more than she anticipated.

She contacted 3 local accounting firms whom she knew and had a reasonable working relationship. Two of these practices did not have the cash flow to pursue her opportunity however one practice was interested. Following a period of due diligence the prospective purchaser made her an offer of £1.1 for every £1 of gross recurring fees which she accepted. Whilst her lawyers were preparing the heads of terms agreement she called Morgan Cox to ask if we thought that this was a fair deal.

We were surprised that she had found a buyer and had gone though the entire process without any legally binding confidentiality agreement! Her prospecitve purchaser had her entire client list including contact details, and she was potentially fully exposed. One hour later the Morgan Cox team had addressed this issue and full legal documentation was obtained from the purchaser.

The vendor was surprised when we told her that it was indeed a sellers market. Our registered database of potential buyers had been growing every day particularly through our free buyer database email registration form on our website. At this point we offered her our challenge. Let us market your practice to our registered buyers to see if we could obtain any more interest on a no obligation basis. If we don't find any interest, then proceed with your current buyer at no cost. It was a no risk proposition and the vendor decided to give us 5 days to see what we could do.

From our 580 active buyers (at the time) we had 9 expressions of interest with 2 firm offers both at the 1.3multiple of GFR. Both had reasonable payment and claw back terms.
4 weeks after contacting us to check that the deal she was being offered the vendor had a new buyer and an additional £80,000.
If you are currently selling your accountancy practice, take the Morgan Cox accountancy challenge today. An easy decision.

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Poor broker advice and lack of legal input costs a vendor 200,000 as demonstrated in this case study:

Some of the Morgan Cox Accountancy team met with our legal colleagues last week to catch up with some of our accountancy clients sales progress and also to share important feedback between the various components of the sales process.

Unfortunately what was shared with us was deeply upsetting so we thought that we would share it with you in order to help learn the lessons and prevent another case like this from happening in the accountancy sales market.

In 2009 an accountancy practice vendor engaged the services of a UK accountancy practice broker (not us) to sell her practice. One of the reasons why the vendor engaged this broker was because they told her that they were experienced in the legal aspects of the sale process and could deal with all legal aspects including the sale and purchase agreement. She was told that this alone could save her up to £6000 in legal fees which she found attractive. She subsequently engaged the service of this broker.

A purchaser was found and the vendor followed the brokers advice and let them deal with the legal aspects fo the sale. A sale and purchase agreement was provided which she duly signed. The agreed purchase price was £400,000 speak over a thirty six month period with 4 equal instalments of £100,000. After 24 months however the third payment was not made. It was disclosed at this point that the purchasing company no longer existed and that the assets had been sold/transferred to a new company (owned by the same directors as the purchasing company). The sale and purchasing agreement was only made with the original company and no warranties to prevent the transfer or sale of the assets had been agreed. This subsequently left the vendor £200,000 out of pocket. The vendor engaged the services of one of our legal providers in an attempt to recoup the outstanding debt which after a period of 12 months proved unsuccessful and resulted in legal costs of £20,000. 

There were two elements that could have prevented this situation from arising, both of which should have been in the original sale and purchase agreement. Firstly there should have been a clause in the contract preventing the sale or transfer of any of the sold assets during the buyout period. Secondly the vendor could have been saved by the presence of a clause where the responsibility for settling the money owned was joint and several between the acquiring company and its directors. This would have enabled the legal team to take action on a personal basis against the directors and their individual assets. This last clause alone would have posed as a deterrent to such practices occurring. It would have served as an avenue to also recoup the money owed.

You may ask why the vendor did not take action against the broker who essentially created this situation by giving advice that could be seen as misleading at best. This avenue was not possible because of the contract of engagement which had been drawn up by a lawyer and which the vendor had signed. In it was a clause whereby the vendor gave up all possible and future claims against the broker.

There are several lessons to be learnt from this case report.
  • Always seek expert advice.Accountancy practice legal mistakes cost money
  • Don't try and save costs by cutting corners.
  • Read the small print on any contract.
  • Do engage the services of a specialist lawyer. They are not cheap, however the above situation could have been prevented had they been engaged.
  • It it sounds too good to be true, it normally is.
  • Get it right the first time as once you have signed any legal contract you are bound by the terms contained within the contract.

Selling your accountancy practice is an important step. You would have spent a lifetime building your practice up and your financial security and retirement could depend on the proceeds of it's sale of the assets and goodwill. Morgan Cox Accountancy are a specialist accountancy broker operating in the UK. We partner with specialist lawyers who only deal with the sale and purchase of accountancy practices. We have negotiated reduced capped rates for legal services and can introduce you to a short list of these specialists to act on your behalf. We will never attempt to act on your behalf in areas where you are better represented by a specialist as the consequences such as the above case report are all too frequent.

To discuss our services please contact us to day or view our current accountancy practices for sale in the UK.


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Recent comment in this post - Show all comments
  • James
    James says #
    Don't cut corners
    I am not surprised by this case report. Why would you sell one of your greatest assets and for the sake of a saving of £4-6K expos

Welcome to the accountancy practice news section distributed by Morgan Cox Accountancy. Due to popular demand our readers and registered users have requested more detailed and up to date information on the accountancy market. Our aim in to produce informative articles that our readers want to know about. Updates in the accountancy practice market will be easier to distribute and users will be able to subscribe to this category to get notifications of new accountancy market news. As one of the UK leaders in the accountancy merger and sales market we hope that this informative resource will continue to demonstrate that we are the UK experts that you will choose to consult. If you are thinking of selling, merging, buying or arranging an accountancy practice valuation then do call for a free no obligation discussion. To view our current listings visit our accountancy practices for sale page.
If you would like to request an article about any accountancy subject or simply want a question answered then drop us an email. We can then incorporate a detailed response which other may also find useful in our next accountancy news section.
Kind regards

The Morgan Cox Accountancy Team

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Recent Comments - Show all comments
  • David Jones
    David Jones says #
    Great Idea!
    I have been looking for up to date information on the accountancy sales market. This is a great idea to have real news published d
  • Morgan Cox
    Morgan Cox says #
    Please register to comment
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