analytics

Latest Market Data - October 2023

Higher Selling Prices and Faster Sales

 

Published October 2023

DMY's latest six-monthly release of Market Data is below.  This release contains more data and insight than ever before and re-inforces our commitment to be  the leaders in selling accounting and bookkeeping practices across Australia. Our new enlarged data set includes thirty recent practice sales# , highlights the trends from our last five Market Data releases going back to 2021, and includes for the first time data on how long practice sales are taking.

There are no shortage of competing opinions when it comes to the price a practice can fetch, how easy it is to sell, and what is "standard" when it comes to 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.

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

Key Takeouts

 

1. Practices are selling for an average of 114 cents in the dollar (metro) and 107 cents (regional)

  • For metro practices this is four cents higher than six months ago (110 cents), a material increase.
  • Significantly, all bar one of our thirty recent practice sales sold for more than 100 cents in the dollar including all five regional practices. This reinforces our regularly expressed view  that "110 cents" is the new "dollar in the dollar". 
  • The thirty practices have sale multiples ranging from 100 cents to 130 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 client mix, profitability, location, fees per partner and operational efficiency continue to drive value up or down as well as individual buyer characteristics.
  • There is no correlation between practice size and sale multiple.
  • For larger or very profitable practices it can be more appropriate to sell based on a multiple of maintainable earnings.

Since 2021 the average sale price multiple for metro firms has steadily increased albeit in a narrow range of 109-114 cents in the dollar with an average just above 110 cents:

 


 

2. 80% of Practices are selling in less than 90 days

  • We have included data below for the first time on how long practices take to sell.
  • The time measured is from listing date through to execution of a Heads of Agreement with the preferred buyer.
  • This shows that around 80% of practices are selling in 90 days or less. This is a faster deal completion than at any time in the last three years.
  • Three of the five regional practices are including in the 20% that took longer than 90 days which is expected given the small buyer pools.

 

 

3. Practices attract an average of 72 interested buyers per listing 

  • This is slightly down on six months ago (76 buyers) but is still 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. Nevertheless DMY's regional marketing campaigns are still attracting a very healthy average of thirty buyers per listing. 
  • A consistent theme of the ten practice sales with the highest level of buyer interest is that nine of them had fees of less $1 million and they were all inner-metro, albeit spread across Sydney, Brisbane and Melbourne. 
  • There is no direct correlation between the length of sale process and the number of buyers.

Average buyer numbers per metro listing have remained healthy over our last five Market Data Releases with small movements up or down from an average of 75:

 

 

3.  16% of the sale price, on average, is held in retention, with 15% remaining the most common amount.

  • This is slightly lower than six months ago (17%) but 15% remains the most common retention level. 
  • The thirty practice sales have retentions ranging from 0% up to 40%. This broad range reinforces the need 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 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 remains the default period for retention with only one of the thirty practices having a retention of two years.
  • Buyers who insist on a high, multi-year retention without specific logic continue to miss out.

The average market level retention has remained consistent around an average of 15% since 2021:

 


 

 

Detailed Data for Thirty Recent Practice Sales


The supporting detailed data for our October 2023 Market Data release is provided below:

 
Finding 1: An average 114 cents in the dollar selling price (metro) and 107 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 72 buyers per 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… selling prices are trending up and levels of buyer interest remain healthy. If you have a good quality practice you should feel confident of achieving a successful sale within 90 days, with a strong commercial outcome and a good new home for your clients and team. Don't be complacent though or assume a practice sale is easy to achieve on your own. Buyers will walk away if they consider you difficult to deal with or unrealistic in your expectations.  All of the positive results above have been achieved by practice owners who have chosen to engage DMY for our track record, unrivalled service and expert guidance.


For buyers…a good understanding of the current market, patience, empathy and flexibility remain critical. Buyers need to have a strong cultural fit with the seller to get a seat at the table but will also need to be commercially sharp and attuned to the seller’s needs if they want to secure that prized acquisition. 


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

If you would like to see more Market Data,  check out the accompanying article: Profile of a Practice Sale where we take a closer look at the who, what and why of these thirty recent practice sales.

 

Mark Emney

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

 

Daniel Jones

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