A Happy New Year to Everyone – May it be a fantastic year for you, your family and all that are close.
As the year ended, we traveled around major cities and had a chance to meet with many of our old contacts in the industry, buyers and sellers, listening to each about their last 12 months, from positives to negatives, needs vs wants and the dreams.
We thought, maybe you’d like to know some of the gossip, shortened and redacted into bite size intelligence.
What’s happening out there in 2024?
Well, there are a lot of secrets, but we have gleaned a fair bit of intel around larger players entering the market from overseas. This wave seems to continue to lap at the doors of larger players that see Australia as not only a fertile ground but also a safe space to invest.
Smaller firms: 1m mark are ready to acquire practices of the same size to about 3m.
Small: Medium firms have a broader reach seeking tuck-ins of $500k up to 5m
Medium: Large firms seek that 1m tuck-ins to 10m flagships
Large to The Big 4 – well, can’t say much about the Big 4 other than UHFFFFF but this has set the larger firms into hunting mode and that’s not just for other flagship firms but for the Big 4 clients and importantly of the staffing opportunity.
Are the banks still lending?
YES! After an interesting 2020/21 where we saw some of the key Professional Lending Bankers move to other banks, this has led to a revitalised push by many to up their game in our space and thankfully saw their policies bear fruit in the industry during 2023. We have no doubt 2024 should see better traction, as they have settled in well now, helping buyers from partnership buy-ins, buy-outs, management takeovers and favourable refinancing terms.
Who’s talking about selling?
Cultivating a sale takes a long time in this industry, generally a long-term contact or an introduction from another long-term relationship. If not, there is an internal process of the vendor to gain trust with the party who is helping them as well as an internal journey which can take a longer time.
We are currently talking with parties that range from $300k through to $10m+
[No, they don’t show up on the AFR Top100 if not they would have been approached about once a week by some of you over the last year]
What are the buyers profile?
If they are new to the game they believe they know it all and are fairly flexible but naturally apprehensive and data seeking.
If they are not new to the game and are savvy buyers, if you want top dollar you are going to have to prove you are worth it, from good standing EBIT multiple to years of stability with gentle growth on revenue and skills.
Each size of firm brings a different culture on top of the location and direction of the practitioner.
What is the ‘current’ sweet spots sought by buyers?
Profitability: 30%+
Opportunity: Integration of additional services
Staff: Good Accounting staff with Partnership prospect
Location: Major cities, Regional & Rural hubs, plus the ability to relocate
Revenue Bands: 300k-1m, 1-2m, 2-5m, 5-10m+
Partner to Revenue ratio: Lower the better, think 1m per partner as a guide although this can change with exciting partner numbers versus remaining.
What are Accounting Firms being paid?
‘Revenue Multiples’
Lows: 65-80c for antiquated, low profitability, in need of significant restructuring
Highs: Topping out at $1.50 for Medico and specialist firms
Note: the above revenue multiples are for Accounting services only
Specials circumstances such as impairment, death see a common scenario of a deposit then payment over multiple years up to $ for $. Or complete payment upfront for specialist practices.
‘Ebit multiples’
Bank funding and savvy buyers will always look at the multiples
Range: 2-6 times
Note: if you are a highly profitable firm, say 50%, please don’t think this would equate to a 6 times multiple equaling $3 for $
The Deal = The Terms
Flashy numbers don’t take into account the clawback and second phase to the transaction i.e the contract. The contract should be looked upon as the second negotiation
Jadeja Partners
We are long-term partners in the industry, coal facing, expert negotiators, transparent and most importantly culturally aware (business and country of origin).
If you’d like to have a confidential conversation, receive a market appraisal or just catch up for a face to face please let us know.
Mobile is on – lets go 2024!
Magnus Yoshikawa
M: 0408885944
