Is your practice buyer-ready?

The article is relevant to members in New Zealand and was current at the time of publication.

Buyer expectations are shifting in New Zealand’s accounting practice market, with paperless firms, stronger client relationships, regional practices and new investor groups reshaping what makes an attractive acquisition, according to Riki Sila, Managing Director of Accounting Practices. 

Purchasers want less risk, so they are looking beyond recurring fees and profitability to see if a practice can be successfully transferred, integrated and grown after settlement. 

No more old-school systems

“Buyers in New Zealand are very clear about what they want,” Sila says. “It’s a paperless practice, nothing still running MYOB or Solution 6 that they have to convert to a more modern system.”

With buyers becoming increasingly selective, Sila says owners planning to sell within the next five to 10 years need to focus on becoming buyer-ready, not just profitable.

“It’s still a strong market for sellers, but there are enough listings to allow buyers to be selective.”

Relationships are the real asset

Technology may get buyers through the door, but goodwill and relationships are what ultimately determine value.

Buyers, says Sila, are paying very close attention to whether client relationships extend beyond the owner.

“They don’t want a team that’s just answering the phone and replying to emails,” he says. “They want a team that has had face-to-face contact with clients.”

Practices with strong teams, shared client relationships and documented processes give buyers greater confidence that clients will stay after settlement.

Sila says some sales have run into difficulties because vendors became ill, died or chose not to complete the agreed transition period, leaving buyers exposed.

Christchurch bypasses Auckland

Buyer demand is also shifting geographically.

Christchurch has emerged as one of New Zealand’s hottest markets for accounting practice sales this year, while purchasers are increasingly looking beyond the main centres to smaller regional firms.

Sila says regional practices are attracting attention because of their proximity to main towns, loyal client bases and strong community connections.

By contrast, he describes Auckland as “a ghost town” in terms of current buyer activity.

Investor syndicates on the rise

While private equity dominated practice acquisitions in recent years, Sila says a new wave of buyers is emerging.

Investor syndicates, often made up of established practice owners, are pooling capital to acquire firms, broadening competition for practices across the country.

“People who’ve cashed up are now forming syndicates with other similar owners to buy, collectively, not just in central parts of New Zealand but in the outskirts as well — and in the suburbs.”

Some syndicates are acquiring practices as part of longer-term growth strategies that could eventually lead to sales to offshore investors.

Practices valued at NZ$1 million are particularly attractive, although demand extends to smaller firms.

“Metropolitan practices with over NZ$1 million in fees are achieving around 100–110 cents in the dollar and regional practices about 90–100 cents in the dollar.”

Culture is the deal breaker

Financial performance remains important, but Sila says some sellers have come to regret not making “cultural fit” a priority. 

“If you’re going to sell, make sure it is the right culture fit.”

The right buyer is not always the one offering the highest price, but the one most likely to retain employees, preserve client relationships and protect the firm’s reputation after settlement.

Beyond the transaction

Preparing a practice for sale is about more than improving profitability. It also means thinking about what happens after settlement — to clients, employees and yourself.

Sila says too many practitioners focus only on the deal and fail to consider what comes next. 

“They may get good cash in hand, but at the end of the day, it’s their legacy that will be remembered.”

If you are thinking of selling:

• Build a paperless, digitally mature practice.
• Develop client relationships across your team.
• Document systems and processes.
• Choose a buyer who is the right cultural fit.
• Plan your own future, not just the sale.

If you are thinking of buying:

• Conduct thorough due diligence; leave no stone unturned.
• Work with an experienced broker.
• Have finance approved before making offers.
• Assess client relationships, not just recurring fees.
• Look beyond the main centres for opportunities.

 

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