Accountancy practices have always been bought and sold. The current talk of selling to a consolidator, however, brings an added dimension to the question of succession.
Many small accountancy practices with fees of up to, say £150,000, should not have a problem selling up for a multiple of those fees.
Buying, however, whether as an individual or a partnership, can be a costly, painful and time-consuming business. I have had some horrific experiences in the course of 25 years. Litigation, real or threatened, often makes matters worse, leaving lawyers gaining and accountants losing.
In such cases consolidators would doubtless take a much harder line.
Furthermore, they will be very clear and focused on their needs when making an acquisition, having set out strict hard-nosed criteria. As a result, any agreement by a consolidator to acquire an accountancy practice will be all embracing and, if breached, the consolidator is unlikely to be kind!
For all the potential problems, however, consolidators should have an appeal to some medium-sized, well-established practices simply because they have resources – called cash. With the rapid and constant change within the accountancy profession, many such practices are finding it difficult to plan and, above all, execute an effective exit package for partners. On the face of it, an ideal answer could well be to sell to a consolidator.
However, the consolidator is not simply going to look at the name and standing of the firm. The issue of on-going commercial viability will be paramount.
The first problem for many practices is when you take away the value of the partner, of his or her ‘time’, there is often little or nothing left by way of super profits. Add to all of this the issue of culture.
Well-established, medium-sized practices have, by comparison with smaller ones, many partners of varying ages.
This results in difficulties for the managing partner, committee or board.
In particular it is often difficult, if not impossible, to effect change in attitudes amongst partners in order to cope with the changing face of the profession, commerce and the demands of clients.
There is a role for consolidators here in the UK. However, it is not necessarily the one that everyone thinks of, namely, a vehicle into which to sell one’s practice. The smart firms will use it as a spur to overhaul their practices with a view to dramatically improving the viability of their services.
That way, they will not only gain significantly increased earnings but also a happier partnership and, indeed, staff. They will also put themselves in the ‘sellers’ market rather than that of the ‘buyer’!
- David Turnbull is chief executive of the UK 200 Group
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