Intense Competition to Acquire Accounting Practices

 - Market Data Release November 2024 

 

Published November 2024

DMY's latest six-monthly release of Market Data and Insights is below. Our data set includes thirty practice salesover the last twelve months as well as the key trends from our last seven Market Data releases since 2021.

There are no shortage of competing opinions when it comes to the price an accounting or bookkeeping firm can sell for, how much demand there is, and what is "at market" for key commercial terms such as retention. Through the deep use of data and insight, DMY aim to help sellers and buyers cut through the noise and build their knowledge to create a more efficient and transparent market for all parties.

We are proud of the reputation that we have built over recent years as the most comprehensive and trusted source of market data and fact -based insights on buying and selling accounting and bookkeeping practices.  If you are serious about successfully buying or selling, educating yourself on the market is key. Enjoy the read and let us know what you think. 

# The majority of these practice sales are pure accounting practices. They also include accounting practices with bookkeeping, accounting practices with financial planning, bookkeeping practices and specialist audit.

Key Takeouts

 

1. Practices are selling for an average of 113 cents in the dollar (metro) and 112 cents (regional)

  • All bar one of our thirty recent practice sales sold for higher than 100 cents in the dollar, including eight our of nine regional practices.
  • Anyone who still believes in the mantra "practices sell for a dollar in the dollar" is well and truely out of touch with today's competitive market. 
  • For metro practices the average selling price of 113 cents in the dollar is consistent with our last Market Data in April 2024.
  • The thirty practices have sale multiples ranging from 100 cents to 125 cents in the dollar. This broad range highlights the importance for sellers of having their practice independently assessed using a robust methodology to avoid leaving money on the table.
  • Specific practice characteristics around size of fees, client mix, profitability, location and/or ability to relocate, and operational efficiency continue to drive value up or down as well as the specific context of individual buyers.
  • We anticipate the upper range will increase over the next 12 months with a number of high quality practices currently in market at 130 cents in the dollar, or higher, and receiving strong interest from buyers.
  • For larger or very profitable practices it can be also be more appropriate to sell based on a multiple of maintainable earnings.
  • Since 2021 the average sale price multiple for metro firms has trended upwards in a narrow range of 109-114 cents in the dollar with an average of 111 cents:

 


 

2. 60% of Practices are selling in less than 90 days

  • This is consistent with our last release in April 2024. 
  • The time measured is from listing date through to execution of a Heads of Agreement with the preferred buyer.
  • We never recommend rushing but, with a well structured sale process and a large and diverse pool of buyers, 90 days is now very realistic to achieve the sale of a well run metro practice with fees < $1 million. 
  • Regional practices are harder to predict given the smaller buyer pools although four of the nine Regional practices in our cohort also achieved sales in less than 90 days. 

 


 

3. Metro practices attract an average of 83 interested buyers per listing 

  • This is up on six months ago (69 buyers) and remains materially higher than pre-COVID when 40-50 buyers was closer to the mark. 
  • Unsurprisingly, there is more buyer interest for metro practices than regional counterparts.
  • However, regional practices are also seeing healthy levels of interest with DMY's marketing campaigns attracting an average of thirty five buyers per listing, which provides a healthy buyer pool from which to secure a buyer with a strong cultural fit.
  • It should be noted that having 83 interested parties enquire on a practice does not mean 83 people accessing confidential information or even the identity of the seller.  Nor does it mean the seller having to waste time meeting lots of people who are not suitable. DMY runs a very structured sale process to avoid this.
  • A consistent theme from sellers is their (pleasant) surprise at the volume, quality and diversity of buyers.  As further evidence of this, of the last 75 practices that DMY has represented for sale, more than 70 different buyers have been successful with no one purchaser acquiring more than two practices.
  • Another consistent theme is that the practice sales with the highest level of buyer interest are all metro-based with fees < $1 million. Locations included Sydney, Brisbane and Melbourne indicating that demand is equally strong across the country.
  • Average buyer numbers per metro listing have remained high over our last seven Market Data Releases with small movements up or down from an average of 77:

 

 

3.  16% of the sale price, on average, is held in retention,

  • This is marginally higher than six months ago (15%).
  • Interestingly, 10% is now the most common retention level with eleven of the thirty practice sales at this level (15% was the most common in April 2024).
  • The thirty practice sales have retentions ranging from 5% up to 40%. This massive range shows how important it is for both sellers and buyers to focus on the specific risk profile of the fees being sold/acquired, and the transition role of the Vendor in supporting client retention.
  • Pragmatic sellers with higher risk client portfolios need to be flexible while sellers with less risky books, or mitigating factors, can rightly secure a lower retention.
  • Conversely, smart buyers, once they identify a strong cultural fit with a seller and a reduced transition risk, use retention as an effective negotiating tool to differentiate from the competition.
  • One year continues to be the default period for retention with only one of the thirty practices having a retention of two years. This has been consistent for the last three Market Data releases and buyers who insist on a high, multi-year retention without supporting data and logic continue to miss out.
  • The average market level retention has remained consistent around an average of 15% since 2021 (despite what many buyers tell us!).

 


 

 

Detailed Data for Thirty Recent Practice Sales


The supporting detailed data for our November 2024 Market Data release is provided below:

 
Finding 1: An average 113 cents in the dollar selling price (metro) and 112 cents (regional)

 

 

Note: Practice Sales are ranked in ascending order in each graph ie Listing #1 above is not necessarily the same as Listing  #1 in other depictions.

 
 
Finding 2: An average 83 buyers per metro listing

 

 

Note:Practice Sales are ranked in ascending order in each graph ie Listing #1 above is not necessarily the same as Listing #1 in other depictions.

 

 
 
Finding 3: An average 16% of sale price held in retention

 

Note:Practice Sales are ranked in ascending order in each graph ie Listing #1 above is not necessarily the same as Listing #1 in other depictions.
Only 29 listings are featured as one was subject to an alternative structure.

 

The Wrap

 

For sellers… all of the key indicators around buyer demand, selling prices and time to sell remain positive. Based on what buyers are telling us and we are seeing in the market, we see no sign of this changing over the next 12-24 months. If you have a good quality practice in an attractive location (or it is easily relocatable) you can be confident of achieving a successful sale within 90 days with a strong commercial outcome and a buyer who is a good cultural fit for your clients and your team. Don't be complacent though or assume the successful sale of your practice sale is easy to achieve on your own. Buyers will turn to more appealing prospects if they find you difficult to deal with or unrealistic in your expectations.  All of the positive results for above have been achieved by practice owners who have chosen to engage DMY for our growing track record, professional sale process, unrivalled network of buyers and expert guidance.


For buyers…a clear understanding of the current state of the market is critical. We regularly see buyers miss out on opportunities because they want to pay dollar for dollar or insist on a high, multi-year retention when the risk profile of the practice does not warrant it.  Patience, empathy and flexibility also remain key. Buyers need to have a strong cultural fit with the seller to get a seat at the table but will also need to be attuned to the seller’s needs and flexible in their approach if they want to secure that prized acquisition in the face of intense, and growing competition.


To discuss these findings in more detail and what they mean specifically for your situation, contact DMY’s Directors below.

 

 

Mark Emney

Mobile: 0434 079 530
Email: 
mark@dmyassoc.com.au

 

Daniel Jones

Mobile: 0401 493 773
Email: 
daniel@dmyassoc.com.au