If you are considering selling your practice ahead of MTD, what factors should you consider?
There are many signs to indicate that both clients and smaller practices are unprepared for MTD.
At Foulger Underwood we have feedback that only 45% of clients will actually have registered by the required date and the efforts of the accounting firms to explain and bring their clients on board is woefully short of the effort and time that is going to be needed.
Alternatives are limited, even small practices have to invest the time needed to on-board their clients. However, there are still opportunities to sell client banks to larger firms. These firms will have systems and procedures in place thereby relieving the smaller practice of significant investment in time, communications with their clients, training staff, upgrading workflows and cost.
There are very few portfolios that cannot be sold. The value might be depressed if the acquirer has to onboard clients and introduce them to new staff and new systems. Typically, a portfolio of £100k might be sold for between £75k and £110k, with clawback for lost clients post-deal. Alternatively there could be sum certain deals with no clawback; however, in these cases consideration would drop to say £35k to £75k.
These values are also subject to the quality of the clients, opportunities to develop further revenues from them and the commercial pricing of services.
Rural locations with a local client base might be more difficult to sell given there are fewer acquirers. We would look to larger practices with a team of employees who could absorb a small portfolio, without increasing staff numbers and cost.
All staff would transfer under TUPE; however, the age profile of the staff often mirrors that of the selling practitioner and in many cases staff may take this opportunity to leave or retire if faced with a longer commute and a larger firm culture and working environment.
Property issues can be an untimely hurdle. Unexpired lease situations can be costly as the premises are not likely to be retained by the purchaser.
Sellers will also have to hand over their clients and introduce a new client liaison partner. Sometimes this may be a matter of two or three months, but in other sale situations, without staff transferring, the handover might be over a longer period of two years, but latterly in an on-call situation.
These are all workable issues if you wish to exit. The process is a well-trodden road and we would be very happy to discuss opportunities with selling practitioners if they wish to explore exit alternatives.
Keith Underwood – Managing director, Foulger Underwood