Ryan Macready: Buying and selling accountancy practices – options, preparation, and industry trends

Ryan Macready: Buying and selling accountancy practices – options, preparation, and industry trends

Ryan Macready

Ryan Macready, senior solicitor at Macdonald Henderson, discusses the intricacies of buying and selling accountancy practices.

The majority of Scottish accountancy firms are owner-managed independent general practices, with a local client base. When approaching retirement age, these owner-managers will invariably face up to two questions: what will happen to my practice? And how can I realise value for my years of hard work in building it?

The answer to these questions can be complicated. The proposed seller will need to consider their employees, their ongoing clients, the continuity of their business, and the finances and commercial terms associated with any potential sale.

The most common demographic of owner-managers seeking such an exit is the over 60s. These questions are likely to be a more common feature in the coming years with the same demographic in Scotland expecting a 50% increase in the population by 2033.

Three potential exit options for owner-managers

Some accountancy practices will have a team of professionals, fresh and hungry to take the reins of the business from the owner-manager. If these individuals can raise the finance, they may wish to instigate a management buy-out. This certainly has its advantages: client retention may be improved if clients are dealing with similar faces and culture; and senior employee retention may increase due to the future possibility of management power and equity.
Alternatively, an outside management team (perhaps that of a competitor practice) may raise finance and seek to purchase the business by way of a management buy-in. This may allow the new management team to build on their own experience and client book, and may breathe new life into the business – allowing for knowledge sharing, contact sharing, and future growth.

A further alternative may see a larger group acquire the practice’s business and consolidate it with its existing offering. This third option is increasingly common as client needs and expectations shift. Many clients now expect real time financial information to be available from advisors with a deep understanding of their business and industry. Often, external accountants will become de facto financial directors for their clients and will be expected to be available at all times to support any one of a number of clients. Add to this technological advancements in the industry, and the appetite for a one stop shop for accountancy services (providing audit, corporate finance, tax, book keeping, and payroll advice under one roof), and it is clear that larger and consolidated firms often have a significant advantage in the industry.

However, despite these factors, small accountancy practices offering tailored advice, exceptional client understanding, and excellent client relations will always flourish. It is no secret that those of us in professional services thrive on two key factors: trust and relationships. A good relationship, founded on trust, will allow many smaller firms to retain clients despite the many strengths of their larger competitors.

Unfortunately, whilst this is a great advantage for an owner-manager continuing to trade, it can also be a disadvantage for one wishing to sell. An increasing trend in accountancy practice disposals is the deferral of a significant proportion of consideration. This is often tied to future performance (whether based on EBITDA, gross recurring fees, or turnover) and if the trusted advisor hangs up their tie and calculator, the client relationships and goodwill associated therewith are not guaranteed to transfer to the buyer.

Accordingly, the dream of selling up, leaving the office, and retiring to a desert island is invariably and unfortunately becoming an ideal instead of a reality. Recent trends have pointed to owner-managers remaining involved with their practice post-completion, offering transitional support to the buyer and assisting with operations, financial management, and client retention or transfer. This benefits the buyer by allowing a smooth transition of clients and allows the seller to protect their future pay cheque. It may also provide a sense of stability for clients and employees alike.

Preparation for disposal

Based on experience, if you are embarking on or considering the sale of your practice, my advice would be to consider the following matters.


Will you be selling the shares in the company or the assets?

A share sale would involve the buyer acquiring the entire share capital of the company operating the practice. Contracts would remain between the same parties and the employees would continue to be employed by the same company, but the voting and dividend rights (and the shares themselves) would pass to the buyer. In terms of the assets, the owner would remain the same and only the beneficial ownership of the shares would change. In addition, the buyer would acquire all liabilities of the company post-completion including tax liability. However, a tax indemnity is usually entered into, providing that the seller is liable for all pre-completion tax.

It is also worth bearing in mind that a share sale is only possible where the practice is owned and operated by a limited company. Where the business is operated as a sole trader or partnership (as is the case with many accountancy practices), a share disposal is not possible.
On an asset sale, a buyer could cherry pick the assets (usually the client book, third party rights, certain of the fixed and moveable assets, IT systems, and goodwill) and leave behind certain liabilities (creditors, tax liability, financing charges). This would involve assigning essential contracts from the seller to the buyer and would also involve a TUPE transfer of the employees. If property is involved, this will also involve an assignation of the lease (if leased) or a transfer of the property (if owned). Client contracts would similarly require to be assigned to the buyer.


Whilst the price to be paid may seem like an obvious point to consider, there are complications relating to price and payment structure that need to be considered. Will it be paid up front or will a portion of the consideration be deferred? Will there be an adjustment mechanism? And, if so, will this be on locked-box or completion accounts? Will the owner-manager have an earn-out? How will you deal with clawback for departing clients? In addition, whilst it may be relatively simple to value recurring income for the practice, how will the parties value non-recurring income? Each of these points can have a major impact on the amount of cash ultimately received by the seller and paid by the buyer. The trend of deferred consideration is one of a number of reasons that transitional support is becoming more common in transactions of this nature.

Transitional support

Another key consideration, both in terms of the sale and in terms of quality of life for the seller post-completion will be what (if any) transitional support will be offered by the seller. Whilst a seller may wish a clean break and to retire with cash in their hand, if deferred income is based on future performance, they may wish to keep a hand in to protect future amounts due. A buyer will want to ensure smooth transition of clients, but will be keen to incentivise the seller to assist with this. To this end, what will any transitional support look like? Will it be provided on a part-time or full time basis? And will the remuneration be additional to or inclusive of any amounts attributable to the business?


One of the key aspects of any practice is, unsurprisingly, its clients. To this end, the parties need to consider how they best communicate the change in ownership and any practical changes arising as a result of the sale. Where payments are tied to future performance and client retention, it is in the interests of both parties that the transaction is communicated to clients in an open and amicable manner. It’s also important that the advantages of the transaction (whether that be access to a wider service offering or otherwise) are communicated to clients. If the seller remains involved providing transitional support, it is also important that they work with the new advisors to ensure a smooth transition for clients.


Whilst this is in no way an exhaustive list, it highlights some of the key issues to consider when contemplating the disposal of an accountancy practice. There are many more and as we all know from professional experience the nuances and complications of transactions are rarely the same. With the many changes taking place in the profession and external factors impacting practice, the current trends are likely to continue. That said, there are a number of willing buyers in the market who (with the agreement of commercial terms) can help those owner-managers realise value for their practice as they come to the end of their careers.

Ryan Macready is a senior solicitor at Macdonald Henderson

Share icon
Share this article: