Are “Boring” Accounting Practices the Hottest M&A Sector in Australia Today?
Are “Boring” Accounting Practices the Hottest M&A Sector in Australia Today?
Public practice accounting has struggled with a “boring” image and attracting talent into the industry. However, practices are in hot demand.
DMY is a national business broker specialising in selling accounting practices, with over fifty sales in the last two years. DMY’s Directors, Mark Emney and Daniel Jones, share their latest market data and insights on this dynamic sector.
Strong Demand and Rising Prices
“It’s a sellers’ market and has been for some time,” says Mark. “Accounting practices are attractive, resilient businesses with recurring revenues and healthy profits. There is huge demand with eighty interested parties for every metro listing and the majority selling within ninety days.”
This unmet demand is putting upward pressure on selling prices.
“The old industry benchmark was practices sell for 100 cents in the dollar (ie 1 x fees)”, explains Daniel. “That’s no longer true. Metro practices with fees over $1 million sell for an average 120 cents in the dollar and regional practices 109 cents.”
“For higher quality firms, prices of 135 cents in the dollar are realistic” adds Daniel who expects prices to remain healthy at the top end.
A Huger Range of Buyers
“DMY has over one thousand parties who have expressed interest in buying practices on our books, with well over seventy different buyers for our last eighty sales”, explains Mark.
For smaller fee parcels, buyers include individuals without a practice, sole practitioners looking to scale, and 1-3 Partner firms.
For larger practices, there are many entrepreneurial firms, $5-100 million+ in revenue, who often have previous acquisitions under their belt.
Motivations to buy, beyond accelerating organic growth, include:
- Adding new services such as Virtual CFO or Advisory;
- Enabling emerging leaders to take on equity; and
- Expanding geographically including regional and interstate.
“This diversity of buyers is hugely positive for sellers,” adds Mark. “It means you can land faster on the right one for you and your clients.”
The Traditional Seller Profile is Changing
“The most common profile of a seller is male, over sixty and ready to retire,” says Daniel. “However, the dominance of this profile is rescinding.”
“Running a small practice requires huge commitment, with unrelenting pressure from regulatory burden and talent shortages. More owners are retiring earlier or making career or lifestyle changes.”
DMY’s data reveals sellers aged in their thirties and forties, while nearly forty per cent are female.
Younger, entrepreneurial owners seeking to merge for greater support are also common.
Future Outlook
DMY see no sign of this “hot” market changing any time soon.
“The increasing diversity of sellers creates opportunities for buyers but competition will remain intense”, concludes Mark. “Cultural fit is still the key factor in determining success.”
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