Market Update: August 2020


Jadeja Partners


Monday, 10th August 2020

2 min read

COVID-19 Brought most deals to a stand still in early March 2020 - normally very busy month for transactions in the Accounting profession

Pre Covid deals are being completed now and up to September – overall, averaging a 4 month delay that may blowout to 6 months

Most Accountants in March 2020 were perplexed by the situation followed by an overwhelmed experience becoming the Centrelink for the Business Community.
Practice that found their routine and cashflow was maintainable after two months have had good traction and regained confidence.

Buyers became quiet, during the March April period with a focus on internal stability vs external acquisition opportunity. This is not to say transactions did not happen, but they tended to be pre-covid momentum based.

Larger well-known branded practices raised their hands gently so as not to be labelled ‘Ambulance Chasers’ in April. Most other forms and normal level interest came back in late June and more so the month of July 2020 due to a natural lull before Tax Season starts.

Current Market rates still sit with a ‘ Cents in a Dollar’ baseline average of ‘Dollar for Dollar’ with discounts on higher risk factors of the practice vs premiums (over dollar for dollar) attached to Central CBD Practices, the profitable Practice and the Practice with Potential (Services or lack off, Management (staff), Geographical location).

WIWO deals may attract up to a 50% Discount but this has always been the case. Fire sales due to death sit at 25c in the dollar with Terms to clawback more.

Longer handovers are in trend due to Covid-19. This is seeing the 2yr handover period becoming the norm with 3,4,5yrs being discussed. If we work the numbers for 3yrs or more, one asks why not keep it. The general answer is because of the practitioners’ age, focusing on ‘remaining relevant’ and the client average age group relevant to the practitioner +/- 10yrs effect on valuation.

Banks are lending: all the major banks and now Private Equity players are still keen to invest in Accountancy Practice. Data due diligence is becoming heavier – be prepared.

There are no bargains in the market due to Covid-19. Don’t search for them; you’ll generally regret it.

Good practices are selling well, and contracts are being exchanged (even in this market!), although, if you decide not to hang around and do a proper handover, expect the clawback you receive to amount to zero as clients will be more sensitive to the change due to Covid-19.

Stay positive. If you are a vendor, it is still a Seller’s Market. If you are a Buyer, it is now more likely you’ll have more natural opportunities to build up the relationship with the client due to a higher than normal interactions wave as they seek advice, direction and comfort. Behavioural Science tells us, the more interactions, the more they’ll love you and therefore become stickier through interdependence. It’s a good time to be an Accountant and even better time for you to check in again and again with your clients – don’t miss the opportunity to engage.

Friends and colleagues in Melbourne, we are all thinking of you, backing you and always in full support as you push through lockdown.

Side note: We are seeking practices for sale and are always available to talk;
mobile number is best 0408885944

Stay Safe!

Magnus Yoshikawa

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