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.
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.
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".....