How much are you looking to receive / pay for the accountancy practice is a key question. For the smaller practices with turnover over of around £200,000 the normal rate is around 1 to 1.4 of the annual turnover / fees. For larger practices above this annual billing rate, the final fee will be more influenced by overall profitability.
How much is your practice worth in the current market conditions? Of course any business is only worth as much as another practice is willing to pay for it though the parameters above are a solid guide to the value. We are able to provide a ball park valuation from early conversations.
If this is satisfactory and you wish to proceed with discussions with possible suitors we will undertake a more detailed valuation on your behalf providing a written valuation of your client base, goodwill and annual revenue.
Within these discussion we can then take the proposal forward to the market and establish quality suitors for the business and a price that meets your agreed expectations.
If we are negotiating between a number of parties then the price will be at the upper end of the scale of course.
Accountancy practice sales / purchases are normally an outright purchase via a capital payment. We do not normally recommend the earn out process of using the practice profits to fund the sale.
We will keep the anonymity of the vendor / acquirer until we are sure that each party is serious about the process.
We will provide as much detail to each party whilst witholding the identities, until each part wish to be introduced.
Run Off PI Insurance is an industry requirement for six years and is cover for the seller in the event a customer brings legal action against the practice.
If you are selling and do not currently have cover, this is something that will need to be put in place.
If the vendor wishes to retain clients then this will become part of the overall package for negotiation.
The seller will normally have to give guarantees that no further clients will be taken on board after the sale has gone through.
This is undertaken in the sale agreement warranties.
Normally the seller and buyer will arrange a time period to stay on and hand over the business for smooth running. Normally this period would only be a few weeks.
Any work in progress at the point of sale will be handed over to be completed by the acquirer with the hand over period assuring natural and seamless progress for the customers.
The amount of work in progress will be stipulated in the agreement with a figure of around 80% returned to the seller and the remainder retained by the acquirer.
The seller normally collects the outstanding debts.
Clawback is where an acquirer can make a claim for a negotiated period of time with regards the overall revenue and customer position.
Any agreed shortfall can be taken from a following tranche payment. Arrangements within the warranty can provide bases for the selling practice for example if the fees are much higher in the purchasing practice which may cause erosion of the customer / revenue base.
If there are planned redundancies following an acquisition, TUPE states that the acquirer cannot arbitarily make personnel redundant within the acquired practice.
Similar conditions apply to the ability to change working practices and conditions of employment. We always recommend seeking professional advice from a qualified solicitor.
If the seller has an existing building either Freehold or Leasehold then we will negotiate between the two parties to come to a suitable arrangement.
There is no quick answer as each sale / purchase is different. The average is normally 3-4 months though.
Occasionally, a transaction may require finance. We have knowledge of specialist Financiers who can provide the backing to make a transaction successful.