analytics

Successfully Navigating the Buying Process

 How to Successfully Acquire an Accounting Practice Against 75 Other Buyers

 

DMY has analysed 20 recent transactions to reveal there are an average of 76 interested buyers for every sales listing in metropolitan locations. Obviously, this means there are 75 buyers who are missing out every time. Here are our top tips to successfully navigate the buying process and increase your chance of acquisition success:

 

  • Move quickly -  typically when we list an opportunity, 80% of the interested buyers register during the first week. It's not about first in best dressed, but to give yourself a good shot you ideally want to be in that all important first round of Vendor meetings.  Don't sit on the Information Memorandum for weeks then wonder why you are at the back of the queue. Additionally, many sellers pride themselves on their "small-company" feel - entrepreneurial, agile and close to their clients. The perception is that larger multi-partner firms lack this and won't be right for the Vendor's clients. It may not always be the case, but we regularly see larger, mid-tier firms shoot themselves in the foot with slow responses and convoluted decision making.

 

  • First impressions count - you only get once chance to make a first impression! At that all important first meeting make sure you are prepared. You've done your research on the seller and their firm, and you are familiar with the IM. Be relaxed but professional.

 

  • Assess the cultural fit early -  if the cultural fit isn't strong then it doesn't matter about the commercials and other aspects of the deal. Don't try and force it. It won't work. Move on. Conversely if the cultural fit is strong then put your best foot forward to secure the deal. This is the one you have been waiting for!

  • Have a high degree of empathy - ee have seen some awful examples of buyers show no regard for the feelings of the seller and treat the interaction as purely a transaction. For 99% of sellers it is so much more. Buyers should walk in the shoes of the seller (and vice versa) to build trust and show that they are the right party to take over the seller's clients and people.

  • Understand current market values- we've seen buyers offer 80 cents in the $ for a practice selling for 100 cents. They refuse to recognise the value and assume the seller is desperate to sell. This is rarely the case. Buyers should educate themselves on current market values and if they aren't prepared to meet them, don't waste everyone's time.

  • Follow the process  - buyers who try and conduct due diligence before they've even met the Vendor are always going to struggle. It screams "hard work" to the Vendor and you're likely to get pushed to the back of the line. Resist the temptation and recognise that if you follow the process there is always plenty of time for due diligence at the right time.

  • Have financing in order - we regularly hear frustration from buyers around the speed that banks operate. This is a tricky one, but the onus is on buyers to ensure they have all their financing lined up when it is needed. We have seen deals fall over at every stage, even post Contract of Sale execution because financing has fallen over. Manage it closely.

  • Avoid moving the goalposts - we always encourage our clients, the seller, to execute a non-binding Heads of Agreement covering the key commercial terms. This ensures seller and buyer are aligned, and saves time and money when it comes to lawyers drafting the binding Contract of Sale. While the Heads of Agreement is non-binding it's never a good look when the buyers tries to change the commercial terms in the Contract of Sale without reason. It damages the trust that has been established and can be a significant red flag to the seller. We have seen deals fall over at the 11th hour as a result.

 

In summary, if you are a buyer looking to successfully acquire, focus on those opportunities that fit well strategically and culturally, move quickly, invest time in building trust, run a good process and stay on top of your financing. And be patient. 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