This informal CPD article How to find accountancy firms ripe for acquisition was provided by Capitalise an Adviser-led capital advisory platform, designed to help businesses build stronger, healthier balance sheets.
For accountancy firms looking to grow through acquisition, the first step in the journey should be pinning down specifications for likely targets. Then it’s time to start drawing up a list of specific firms you might approach.
How to find accountancy firms ripe for acquisition
They might be competitors who would pose less of a threat if brought into the fold. They could be firms with particularly lucrative, high profile or interesting clients. They might have specific expertise or talent that would significantly enhance the capability of the acquiring practice.
Or it might simply be that they represent an easy win that’s too good to miss – perhaps with partners nearing retirement, evidence of a dwindling focus on marketing, or the loss of their competitive edge.
The reason it’s important to start thinking about your requirements in the abstract, as suggested above, before emotions and personalities come into play, is because acquisitions can be especially charged. While accountants are better equipped than many to make objective business decisions, they're not immune to the power of personalities and sentiment.
Guide to funding, buying and selling accounting firms
When we were putting together our new guide to funding, buying and selling accounting firms, the director of an accounting firm in the East of England said ”our most successful acquisitions have been of firms that we already know of and respect”.
There might even be firms the acquiring practice is working with already, either as a supplier or buyer of outsourcing, or as a referral partner for specialist services such as mortgage advice or audit.
That’s a good starting point in many cases, with perhaps the caveat that there might be an unknown firm, one that isn’t particularly respected, which would nonetheless be a better target in purely commercial terms.
Imagine, for example, a poorly-run practice whose client base has been dwindling for five or so years. At first glance, it might not seem especially attractive. Dig a little deeper, however, and it turns out the practice is kept afloat by two particularly loyal clients doing huge amounts of business. Equally, it might be that poor leadership is holding back one or more partners with great experience and huge potential.
Pick up valuable clients and talent at a bargain price
There’s potential there to pick up valuable clients and talent at a bargain price. What’s more, frustrated clients and partners might actually welcome the change – not always the case with acquisitions.
Another way to identify possible acquisition targets is through third-party referrals. Networks, both personal and professional, can bring to light practices which are ready to sell. That human connection can also make negotiations easier, or at least mean they get off on the right footing. The only cost might be a nominal finder’s fee.
Or, of course, you could follow the traditional route of working with business brokers. Ideally, they’ll be someone with a track record in advising on accountancy acquisitions in particular – and with relation to firms of a similar size. Fees can be considerable but you won’t generally have to pay the larger part until a deal has been concluded.
Once a target has been identified, there are still plenty of hoops to jump through. For example, the acquiring firm will need to know whether the current owners intend (or hope) to stay involved.
That can be a deal-breaker but, equally, being seen to have forced them out can also sour relations with staff at the firm being acquired.
In summary, the best targets for acquisition:
- provide something the acquiring accountancy firm needs
- is ready and willing to be acquired and
- can be acquired at the right price
We hope this article was helpful. For more information from Capitalise, please visit their CPD Member Directory page. Alternatively please visit the CPD Industry Hubs for more CPD articles, courses and events relevant to your Continuing Professional Development requirements.
