Pre Covid deals are being completed now and up to September – overall, averaging a 4 month delay that may blowout to 6 months
Most Accountants in March 2020 were perplexed by the situation followed by an overwhelmed experience becoming the Centrelink for the Business Community.
Practice that found their routine and cashflow was maintainable after two months have had good traction and regained confidence.
Buyers became quiet, during the March April period with a focus on internal stability vs external acquisition opportunity. This is not to say transactions did not happen, but they tended to be pre-covid momentum based.
Larger well-known branded practices raised their hands gently so as not to be labelled ‘Ambulance Chasers’ in April. Most other forms and normal level interest came back in late June and more so the month of July 2020 due to a natural lull before Tax Season starts.
Current Market rates still sit with a ‘ Cents in a Dollar’ baseline average of ‘Dollar for Dollar’ with discounts on higher risk factors of the practice vs premiums (over dollar for dollar) attached to Central CBD Practices, the profitable Practice and the Practice with Potential (Services or lack off, Management (staff), Geographical location).
WIWO deals may attract up to a 50% Discount but this has always been the case. Fire sales due to death sit at 25c in the dollar with Terms to clawback more.
Longer Handovers are in trend due to Covid-19. This seeing the 2yr handover period becoming the norm with 3,4,5yrs being discussed. If we work the numbers for 3yrs or more, one asks why not keep it. The general answer is because of the practitioners’ age, focusing on remaining relevant and the client average age group relevant to the practitioner +/- 10yrs effect on valuation.
Banks are lending: all the major banks and now Private Equity players are still keen to invest in Accountancy Practice. Data due diligence is becoming heavier – be prepared.
There are no bargains in the market due to Covid-19. Don’t search for them; you’ll generally regret it.
Good practices are selling well, and contracts are being exchanged (even in this market!), although, if you decide not to hang around and do a proper handover expect the clawback you receive to amount to zero as clients will be sensitive to the change.
We are seeking practices for sale and are always available to talk; mobile number is best 0408885944
Magnus Yoshikawa – Jadeja Partners
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