Accountancy Practice in Greater London £1 Million Turnover – Ref 100368
Very well established ACCA Accountancy practice with £1 million turnover in the Greater London area. Staff team for TUPE, established GRF client list. Asking price will be above £1 million. Huge scope for rapid expansion via untapped marketing channels. You must be willing to retain the staff team for a period of time and be in a position to buy at least 51% of the shares immediately (ie have access to a fully qualified ACCA or equivalent member to hold these shares). Full details on request, once terms and NDA signed. Firms usually sell quickly, so please get in touch asap if you are interested quoting reference 100368.
Law Firm Valuations – Methods and Techniques
We are regularly called upon to provide market valuations for solicitors firms across the UK. We produce a valuation report detailing our specific valuation and provide reasons for it. At the same time we also outline suggested deal structures and give examples of agreements we have come across in the past. As our company solely deals with law firms and accountancy practices, we tend to know the likely range of offers that will arise for particular types of law firm. There is rarely consistency in any of the deals we have been involved with and pretty much every deal for sale or merger is completely different.
Here are a few of the valuation methods and figures you will see bandied about.
High Valuations to Get Sales
Recently we have come across a large national multi-sector business broker (the one that calls you regularly to ask if you are selling your business any time soon) providing valuations in the law firm sector. The sales technique for this company is to provide an extremely high valuation in the hope of getting clients to sign up with them for their paid services, so they use a multiplier to produce a figure. You know the type – just search the web for details. The firm will look at the turnover and multiply it by a factor of around 2 to 3. To get customers signed up, we understand that this company will usually go with a multiplier of 3 x turnover.
Rule of Thumb – Law Firms Have No Value
This is all over the internet – mainly written by consultants and buyers looking to acquire law firms without cost. The argument is usually that your firm has no value because you need successor practice status to leave. Without successor practice status, you have to pay your run off costs for the PII insurance. Therefore the firm has no value because any buyer is doing you a favour.
‘Super Profit’ Valuations
Removing partner drawings or dividend, adding in new fee earner costs and multiplying the remaining profits by a factor of between 1 and 4. This involves net profit minus notional salaries for the owners (replacement staff required when the owners leave).
1/3 of Current Turnover
This is advice we have seen from a number of accountancy practices advising law firms. No other factors are taken into account.
National Buyer Calculations 0.8 – 1.3 Factor
Legal Futures reported a little while ago that Knights were acquiring law firms and applying a factor of 0.8 to 1.3 to turnover to come up with a value. We see these types of multiplier applied to accountancy practices – its a very common way of valuing in the accountancy sector due to the recurring fees that most accountants have.
Turnover Multiplier 0.5 to 3
Rule of thumb reported by some brokers – get your turnover, consider the following list, and then use a multiplier to calculate the value. Field of legal practice (is the practice area in a new or growing field that’s becoming more in demand?), number of clients, amount of repeat business and geographic location.
EBITDA (earnings before interest, tax, depreciation and amortisation )
Take the firm’s normal profits and adjust for exceptional income and expenditure. Make the EBITDA adjustments (for high street firms in particular there doesn’t tend to be a lot to do here) including adjustment for notional salaries for the owners and in theory, come to a figure to multiply – reported range of advisers is 0-7.
Net Asset Calculations – multiples of 0-7
Fairly easy to do – the figure is in your annual accounts. It is essentially the firm’s assets less its liabilities. Multiply by 0-7 and there’s your valuation. Niche firms go high, high street firms go low.
DIscounted Cashflow
A method predicting future revenues. Every seller’s dream – eg the buyer makes on offer based on the future recruitment of 3 corporate commercial solicitors to boost the firm’s turnover by 400%! To use this method you estimate future cash flows using your accounts from the last five years and apply a growth rate to forecast a value of the business at the end of a set period. These figures are then discounted. In a nutshell the method looks at the projected rate of return on future cash flows.
Market Comparison
FInally, market comparisons. This is essentially the valuation system we use. Essentially it is a) using market intelligence as to what other law firms have sold for, b) what offers have been received and c) what factors have affected these sales to accurately predict the price a firm will probably attract.
Comments on the list of valuation techniques above:
High valuations are a waste of time (we have never seen a law firm sell for 3 x its turnover!),
No value – most law firms have a value, although those with outstanding PII claims, ridiculous PII premiums or rather a lot of debt rarely do!
Super profit – the super profit calculation looks very sensible in part, but multiplying profit doesn’t work as a valuation technqiue; for a lot of smaller law firms fees are usually tied in part to owner fee generation so buyers will not pay a premium based on them.
1/3 of turnover – not accurate for the majority of cases we think.
National buyer offers – we think the national buyer calculations are solely applicable to particular types of firms that seem to have been targeted for acquisition by the firm in question. Take a look at the Gazette for details.
Multipliers – turnover multipliers of 0.5 to 3 are just pie in the sky in our opinion (please tell us if you have achieved a deal along these lines!).
EBITDA and net asset valuations – very sensible techniques, but again rarely seem to apply accurately in practice because of the use of multipliers.Probably more relevant if a firm is approached by a buyer when not actively selling and wanting to justify a sale price.
Cashflow – discounted cashflow has to be discounted as a viable method of valuing most law firms, other than those with guaranteed income for the next x years. We have one firm for sale that probably falls into this category (Ref 100350 if you want to take a look) – and this is incredibly rare to see.
So which is the most useful?
We would argue that in order to get an accurate valuation in the sector we primarily work in – high street law firms, smaller regional practices and niche commercial firms – you have to use market comparisons. These are the holy grail of valuations. Everything else seems to be wishful thinking or guess work on the part of your advisers.
Getting hold of market comparison data is virtually impossible unless you are working specifically in a particular sector and regularly seeing offers and deals being made. This is why we like to think our valuation service is of particular benefit to our sector – we do have this data and we use it regularly to value practices.
We have seen valuations completed by accountancy practices attempting to do a market comparison valuation by subscribing to a business intelligence service and coming up with ‘recent deals’. Interestingly the most recent deals reported appeared to come from a period between 2015 and 2019 and seemed to be of law firms with turnover in the region of about £5 to £20 million.
Interested in a valuation? Drop us a line – happy to assist!
KPMG & REC Report on Jobs UK – July 2024
Candidates placed in permanent positions fall again
Fastest rise in permanent pay for eight months
Staff availability continues to climb
Commentary from Jon Holt, CEO of KPMG UK
“Despite robust national employment data, the latest survey results indicate that employers
are still hitting the brakes on recruitment with the general election period causing some
uncertainty. Permanent hiring has taken a particular hit, as companies either delay or
focus on temporary appointments. This lack of demand means competition for the few roles
available continues to drive pay growth. There are signs of momentum in the UK’s
economic outlook with overall inflationary pressure easing and consumer confidence
growing as we look towards potential interest rate cuts in the coming months. Our economy is slowly turning a corner and the key task for this new Government is to create fiscal policy that improves both long term macroeconomic conditions and creates stability. This will deliver increased confidence for business investment in the UK – accelerating growth, including in the jobs market.”
Commentary from Neil Carberry REC CEO
“Recruiters report companies delayed some permanent hiring decisions during the election
campaign. Now a new government has been elected, recruitment firms are looking for
that investment to be unlocked. The return of temporary worker demand to positive territory,
driven particularly by the Midlands and North, is a sign that the gentle improvement of the last
few months is still with us despite the political noise. As policy uncertainty abates, and interest
rates drop, we expect permanent hirers to return to the market this summer.”
Sell Your Accountancy Practice – no fees, no contract
325+ buyers available for practices of all ranges from £0-£5 million across the UK. Sell your firm or client list at the best price using our services – completely free to sell using our Bronze Service (*buyers pay our fees). The average accountancy practice receives at least three offers at market rates within two weeks of listing for sale. Listed elsewhere? No problem – we do not tie sellers in. Visit our website for details.
Yes, officially completed now. The real work has started! Thank you again for your assistance in facilitating the purchase and look forward to hopefully doing more business with you in the near future.
Accountancy Practice Buyer, May 2024.
Thinking about selling? Get in touch for a confidential chat – 0800 246 5001 or visit www.jonathanfagan.co.uk
Selection of current buyers registered with us:
| ▪ | Accountancy firm looking to acquire accountancy firms – 9 in total – £100-£500k per practice, Ireland, Channel Islands, Isle of Man plus anywhere in the UK. Firm expanding – £3 million turnover. |
| ▪ | Australian firm looking to invest into the UK and acquire accountancy practices. |
| ▪ | ACA Accountant looking to establish a partnership with a former colleague and able to spend c£800k to £1.5 million on GRF. |
| ▪ | Accountant looking to purchase a practice up to £250k in value – Kent and surrounding areas ideal. |
| ▪ | North London accountancy and tax firm looking to acquire a local firm with fees up to c£370k. Will also consider a reverse buy-out. |
| ▪ | Kent based accountant looking to purchase a firm up to £300k. ACCA qualified. |
| ▪ | Accountant looking for firms to buy in East and North London. |
| ▪ | Bookkeeping company with £500k turnover looking for acquisitions to expand. |
| ▪ | Accountancy practice with offices in North Wales and Camarthenshire. Looking to acquire new Welsh accountancy firms. |
| ▪ | India based. Looking to acquire UK accountancy practice |
| ▪ | ACCA looking to merge local South Wales firms with their practice. £1 million turnover firm in Cardiff. |
| ▪ | FCCA looking to purchase a Kent firm. |
| ▪ | FCCA looking to buy a Greater London firm. |
| ▪ | Industry accountants looking to purchase their own firm. |
| ▪ | Accountant looking to purchase firms in the Dorset area. Poole ideally. £70k-£200k available. |
| ▪ | Accountancy firm looking to acquire a small accounting practice with a good block of recurring fees, ideally with at least 50% limited company clients. £100-250k range. |
| ▪ | Accountants looking to purchase payroll fees – spending up to £50k. Any location. |
| ▪ | New Zealand based accountancy business interested in buying blocks of fees in the UK. 100% online so geographic location is not relevant. ideally looking for blocks with a high proportion of Xero clients |
| ▪ | Accountant looking to set up own practice in South Wales and wanting to acquire client lists. |
| ▪ | Accountant looking to purchase client blocks of up to £500k in value. |
| ▪ | Accountancy firm looking to buy small accountancy practices in the North West – payroll only clients and businesses looked at. |
List your firm or fee block for sale – click here
Thinking of Selling Your Firm or Fee Block?
Now is an extremely good time to consider the sale of your firm. We get at least 15 enquiries per accountancy, tax & audit practice listing and as a guide it is rare for a firm turning over less than £750k to remain for sale longer than four weeks.
We offer three levels of service (Bronze, Gold and Platinum). You can list your firm for sale or fee blocks and we assist with valuations, exit strategies, future proof planning, negotiations, due diligence, heads of terms & BPA/SPA drafting. We will usually have an extensive list of interested buyers for you to consider within 48 hours (we have a database of over 300 accountancy firms and accountants looking to purchase).
We do not charge sale fees and neither do we tie you in to using us. Our company has over 20 years’ experience in buying/selling/merging law firms and accountancy practices. We also provide retirement advice and valuation services, as well as sourcing funding for purchases.
Please visit Jonathan Fagan Law & Accountancy Firm Business Brokers for further details – https://www.jonathanfagan.co.uk
Hiring for Attitude – New Approaches to Recruitment
A recent webinar on “Hiring for Attitude” challenged conventional wisdom in recruitment and we thought you may find it interesting.
The webinar began by asking participants to reflect on ‘brilliant’ colleagues, focusing on soft skills like enthusiasm and dedication rather than qualifications. This simple exercise demonstrated quite quickly that recruitment thinking can be about more than just qualifications a lot of the time. This is backed up by studies in the field – see below.
Key Findings
Eligibility vs. Suitability
A key study presented revealed that eligibility (qualifications, experience) was far less important than suitability (aptitude, versatility) in predicting job performance. The surprising finding: low eligibility combined with high suitability often led to successful outcomes, with employees showing significant growth potential.
Expected Outcomes
The study outlined four scenarios based on eligibility and suitability:
High eligibility + high suitability: Ideal fit
Low eligibility + low suitability: Poor fit
High eligibility + low suitability: Poor fit
Low eligibility + high suitability: Surprise fit
Observed Outcomes
The outcomes observed in real-world settings were equally revealing:
High eligibility + high suitability: Often led to dissatisfaction and turnover.
Low eligibility + low suitability: Rarely hired, but problematic when they were.
High eligibility + low suitability: Resulted in significant issues and reluctance to leave.
Low eligibility + high suitability: Frequently performed well with room for growth.
Strategies for Hiring the Right Attitude
The webinar emphasised several crucial points:
Avoid “quiet quitting” by screening for genuine engagement.
Rethink over-reliance on qualifications.
Use aptitude tests carefully, focusing on relevance and benefit.
Conduct interviews that reveal true personality:
Prefer 1-on-1 over panel interviews.
Meet multiple team members in smaller settings.
Assess cultural fit without sacrificing adaptability.
Ask open-ended questions to gauge problem-solving skills and attitude.
Reconsider reference checks, potentially opting for direct conversations in crucial hires.
Cultural Fit vs. Cultural Add
The webinar also discussed the importance of cultural fit versus cultural add:
Cultural Fit: Hiring someone who fits the existing culture can perpetuate the status quo.
Cultural Add: Bringing in someone who complements and enhances the culture can drive innovation and adaptability.
Additional Insights
Importance of Complementary Skills
The discussion highlighted how less successful companies often tend to hire “people like us”, focusing solely on innovative or driven individuals. In contrast, successful companies hire people with different skill sets, such as team players or those with attention to detail, to create a well-rounded team.
Over-Reliance on Qualifications
The webinar emphasised that there is an over-reliance on qualifications. While important, they should not be the sole focus. Aptitude tests can be useful but should only be used if they add value. If not necessary, they should be avoided.
Practical Tips for Interviewing
To hire someone with the right attitude:
Avoid Panel Interviews: This helps in seeing the actual person.
Prefer 1-on-1 Interviews: More personal and revealing.
Conduct Multiple Short Interviews: Engage various team members in short interviews, like speed dating.
Assess Values: Try to find out someone’s values and see if they align with the companies.
Cultural Fit vs. Add: Determine whether you need a cultural fit or a cultural add.
Questions to Ask
When hiring for attitude, ask open-minded questions that allow someone to talk and expand, such as:
“Explain to me a time when things went wrong and what you did to rectify them.”
Resist the urge to fill silences; let someone speak and you’ll see more of the real them.
References
References are less relevant than they used to be due to the propensity of firms providing factual references. However, in the case of a crucial hire, it might be worth calling the referee for a direct conversation.
Conclusion
By prioritising attitude and cultural fit alongside skills, companies can build more dynamic, adaptable teams ready to face future challenges. This fresh approach to recruitment not only identifies potential high performers but also cultivates a more engaged and motivated workforce.
Implementing these strategies can transform your hiring process, ensuring that you not only find the right people but also create an environment where they can thrive. This approach will help in avoiding “quiet quitting” and over-reliance on qualifications, ultimately leading to a more successful and harmonious workplace.
Further Information
The Help to Grow Management Course is a UK government subsidy backed course aimed at generating growth in small businesses. For further details visit the Small Business Charter pages. Emma Ireland, our specialist locum recruitment consultant, attended a session in June 2024 hosted by Professor Lebene Soga – the webinar is available for viewing online here: https://helptogrowalumni.org/events/webinar-hire-for-attitude-train-for-skill/
