These case studies of retiring accountants and fee block sales show how versatile we are in finding solutions for every situation. See what you can learn from these case studies.
1. Taking time to retire as an accountant
The vendor was looking for exit strategy with a view to retiring after 5 years. She wanted to sell up sooner rather than later as she didn’t want the responsibility of running the practice and also wanted to ensure all clients moved across to purchaser.
Vendor had fees of £180,000 and wanted to receive £60,000 per annum for the next 5 years. In addition she also wanted a multiple of 1.2 X GRF.
Maximiti quickly sources a purchaser who had the capacity to integrate the vendor’s fees into his own practice without increasing the overheads by much. This allowed the purchase could pay the vendor her £60,000 per annum as well as retaining 2 staff members of the vendor and still have enough margins to pay the vendor the full value of his practice over 5 years.
Both parties were extremely happy with the structure of the deal as there was minimal risk of clients leaving as the vendor was fully involved in the practice and the purchaser was confident that he would get a very good return in the long term.
2. Premises included for accountancy practice sale
Vendor called Maximiti looking to sell his practice but only wished to do so if he could sell the practice premises as he was looking to move abroad.
We managed to find a purchaser who wanted to move to the area where the vendor was located.
In order to make the deal a viable option for both parties we offset a portion of the value of the property against the goodwill deal which meant the purchaser minimised the risk of being left with a property if the deal didn’t go to plan and the clients didn’t move across.
The beauty of this deal was that in the long term the vendor received the full value of the practice but it also meant the purchaser was reassured that if he had to implement any clawback it would also decrease the payment of the property. As such the vendor stayed on for longer than he intended to and made sure all clients moved over to the purchaser which meant the buyer also received a good return on his investment.
3. Flexible consultancy for a retiring accountant
The vendors had been in accountancy practice as partners for over 15 years and were simply fed-up of the constant change the profession seemed to be throwing at them and decided it was time to sell. In short it wasn’t what they signed up for, although the practice was very profitable with a high average fee.
The partners were aged around 50 so were not ready to retire although they did have external business interests. Given the prosperous hinterland and strong client bonds we suggested a deal whereby they would be retained by the purchaser as consultants for 3 days a week at the same rate of their basic salary on a rolling contract.
This reduced the buyer's risk and stress of integration whilst giving the sellers a route to exit , as and when they wanted whilst allowing them to focus on their other ventures.
4. Niche premium for accountancy practice sale
The vendor was approaching retirement age after 35 years of accountancy practice but still felt that he had a “good few seasons” in front of him so preferred to ease his way out at leisure . He had built up a very successful niche advisory practice specialising with a narrow focus on a particular business to consumer sector and the firm’s name was well known and respected in trade circles. There was still plenty of scope for a younger accountant to develop the accountancy fees further with his guidance.
He felt that the brand was worth more than a standard valuation and given the rapid growth and solid traction gained in recent years we suggested that they ask 1.75 x fees on condition that he remains for a fixed period of 3 years as an associate in order to allow the buyer to get his feet firmly under the table with the publications who promoted the firm to their readers.
5. Ethnic match for accountancy fee sale
The vendor was from an ethnic background as were many of his clients. He was going away for an unspecified period of time to care for an elderly parent in accordance with the custom but only had a few weeks to deal with selling his practice due to the sudden onset of illness “back home”.
We had a willing buyer on our books, from a similar background, who therefore understood and was sympathetic to the vendor's position. Given their shared ethnicity the buyer was easily able to substantiate the background to the sale story . The deal was agreed within a fortnight at a multiple of 0.6 x with no clawback.
6. Partial retirement with accountancy fee sale
The vendor sought to retire from practice in stages so asked us to consider a fee block sale. We looked at the client profiles and advised her how to split the accountancy fees . It worked best for her to retain clients based on proximity to her home from where she would continue working after vacating the office.
The buyer saw a clear logic and was happy with the arrangement as it allowed them to absorb a small fee block into their existing operation without causing much disruption, paying a multiple of 1.3x
7. Partners retiring at different times but selling their accountancy practice together
One partner was ready to retire immediately but the other was a few years younger and still enjoying going to work each day. The deal was agreed on the basis of 50% of the shares being purchased from the retiring accountant and 40% out of the remaining partner's 50% stake being purchased simultaneously. The outstanding 10% stake of the remaining partner was to be purchased at an agreed future date using a formula to reflect expected growth during the intervening period.
8. Serious illness or unexpected death
In both cases we had to act quickly as the practitioner was not able to assist with handover and any new incumbent would be faced with what amounts to a case forensic accounting cum incomplete records job. Not only is this extremely time consuming, especially as one seller had no staff , but the other employed somebody who was threatening to leave with the client list, which was very disappointing and would be tricky to handle. We advised the family that a quick move would keep sympathetic clients on board although it goes without saying that we were dealing with a fire sale. Any delay risked clients encountering problems that even the most sympathetic could simply leave to fester. It also prevented the employee acting in bad faith as she knew that loyal clients would not tolerate such a move so soon after the breaking of the sad news.
9. Minority partner not wanted by the buyer
Everything looked good on paper and the 80% shareholder partner was most enthusiastic about the deal as she felt that the purchasing accountancy firm was the ideal match for her clients, as did her 20% minority partner. However, the board of the acquiring firm was split as to whether the minority shareholder was a good fit culturally into their business model at partner level. The main partner was retiring from accountancy but a solution was required for her "junior" partner. It is one thing to start up with a junior partner but quite another to "get into bed" with an unknown who would essentially be running the 2 offices being purchased . After detailed discussion with all parties it became apparent the the 20% shareholder had one eye on leaving the accountancy profession within 3 years , by his 35th birthday, to pursue his hobby. It was agreed to accelerate his retirement from accountancy to allow the deal to proceed and he would remain until handover was completed.
10. Emigration and a ticking clock
This was a small firm whose partner was emigrating in 8 months time as his wife was taking up a prestigious lecturing post abroad. Given the stress of uprooting the family he wanted the practice sale to be completed and handed over 3 months prior to departure. Easier said than done with an immovable deadline while also not wanting to disclose the impending urgency to a buyer too early in the process as it would have led to offers that would not reflect the true value of the accountancy practice. We counseled him to start the practice sale process immediately but be prepared for missing the deadline and have a Plan B in place to avoid any rash decisions later on. During negotiations the emigration issue was revealed to the buyer who was completely at ease because a clear plan for handover existed along with post-emigration solutions should the retiring accountant still be required - part of the Plan B.
11. Divorce complications
The selling accountant was enduring a bitter divorce and the other side was adamant that the practice was worth than it was. Given that he was a 50% shareholder, albeit not a working one, he had the power to block the sale.The first thing to point out was what the market valuation was and not what he decided it should be, the next thing was determine whether or not it would be handled as a "fire sale" or it would follow the normal trajectory pre and post sale. It was an unusual practice because several large clients were family friends and most had taken one side or the other. It was pointed out that delaying tactics would simply lead to a loss of value and that the spouses needed to work with a united goal to firstly look after clients and secondly to maintain value. Regrettably we could not save the marriage itself although the clients were manged well and an extended clawback provision for designated fees was put into place given that some clients may decide to leave once the divorce was finalised.
12. Practice consists of 20 very large clients
The accountant was acting as a virtual financial director for the companies, which had a minimum turnover approaching £1m and several well over £1m . The client companies were of a good quality and profitable, established for a minimum of 12 years. In a couple of cases the accountant had dealt with more than 2 generations. The major issue was that the business owners had built up a close and trusting relationship with the accountant who was a regular visitor to many of the premises and certainly in contact with all of them several times a month. The challenge was to replicate that relationship and ensure that the purchaser had the requisite industrial and business experience as well. We suggested that the vendor made it clear that she had hand picked the incoming accountant and continued to work closely during an extended handover period in a consultancy capacity, beyond the normal expected transitional period.
10 Tips before selling - (1:02)
4 Questions Retiring Accountants Ask - (1:05)
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