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Latest Market Data - April 2022

Latest Market Data Including Selling Prices and Buyer Numbers

 

It has been six months since we last published a comprehensive set of market data under the title “The Rise and Rise of the Seller’s Market”.

As the leaders in selling accounting practices across Australia, we are committed to filling the void in publicly available data for the sale of practices.

DMY’s latest market data is below, relating to our twenty most recent transactions. We will continue to publish this every six months so our community of sellers and buyers can stay up to date with the latest insights.


Key Findings

These are our key findings for metropolitan practices:

1. They attract an average of 86 interested buyers per listing.
This is 13% higher than six months ago (76 buyers) and significantly higher than 18-24 months ago when 40-50 buyers was closer to the mark.

2. They sell for an average 109 cents in the dollar with a selling range of 90 -125 cents in the dollar.
This is little changes from six months ago (110 average) and at least 10 cents in the dollar higher than how many other commentators are reading today’s market. The broad spread reinforces the importance for sellers of having their practice independently appraised or valued using a robust methodology to avoid leaving money on the table.

3. Only 14% of sale price, on average, is held in retention.
This is unchanged from six months ago. Retentions also continue to be predominantly for a maximum 12 months.

For regional practices, the results are, unsurprisingly, not as strong but still positive. Sale prices average c. 98 cents in the dollar and there are 51 interested buyers for every listing. Retention terms are more closely aligned to the individual risk profile of the practice’s clients than their regional location.

The supporting detail in relation to buyer interest, selling prices, and retention levels is provided below:

 

Finding 1: An average of 86 buyers for each sales listing

 

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

 

  1. Practices for sale with <$600,000 fees attract the most buyers. Listings - four of the five listings with the most buyers fit into that category.
  2. There is no direct correlation between length of sale process and number of buyers.

 

Finding 2: An average 109 cents in the dollar selling price

 

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

 

  1. Firm size alone is not a key driver of sales price. The listings reflect practices with fees ranging from $300,000 to over $2 million which are evenly distributed throughout.
  2. Specific practice characteristics around client mix, profitability, location, fees per partner and operational efficiency are more important determinants of selling price.

 

Finding 3: Average 14% of sale price held in retention

 

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

 

  1. In a market where strong cultural fit is a fundamental criteria for sellers, retention has shown to be a more effective tool than bidding the price up for purchasers to differentiate from the competition.
  2. Two sales have been completed with zero retention – typically reflecting intense competition amongst shortlisted bidders.
  3. Only 17 listings are featured as three were subject to alternative structures.

 

The Wrap

For would-be sellers… The number of active buyers remains incredibly strong, and the prospect of securing a deal with one who is a strong cultural fit for you, your clients and your team - AND delivers you a strong commercial outcome - is extremely positive.

For would-be buyers…Be patient! Be ready to move quickly when you see an opportunity that fits your target acquisition profile, be flexible with your terms, and ready to compete. Good luck!

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