Are the Kiwis Coming to Snatch Up our Firms?
As we enter June, efforts within the practice transaction space will be at an almost feverish pace as purchasers attempt to wind up due diligence activities and finalise contracts for sale. Whilst transactions take place at all times of the year, the January to June period is traditionally a good time to transact, enabling the purchaser to start afresh in the new financial year.
At the moment, the marketplace continues to favour the vendor with the number of prospective purchasers generally outweighing those selling in the public arena. We also know many transactions take place off market with an outcome achieved before any third party is able to join the process. The past year has also been one of quick, as well as extended transactions. Some particularly complex deals have taken in excess of the typical six month period, while others we have manage through the process in less than four months.
The underlying driver of transactions remains growth and this is for a variety of reasons. The typical questions arise around WHO is seeking to make acquisitions with the candidates remaining varied. The major contender will be a purchaser seeking a fee acquisition with the relocation of a purchase into their premises with the retention of a good proportion of the staff.
Some wish to expand into a secondary office, extending their ‘footprint’ across regions and States. Acquisitions by consolidators are more conservative, however there seems to be a whole private market of aggregator style purchasers but without the aim to list on the stock exchange. Plus, smaller or new practitioners remain in the market, also in search of a smaller fee parcel, often below $300K.
Pure accounting firms are on the hunt, multidisciplinary firms are in search of acquisitions both with and without FP. Financial Planning firms find accounting acquisitions cheap by comparison, therefore they are generally in search of accounting firms without FP in-house. This interest is typically based in and around the CBD and suburban areas of all States of Australia. A recent listing we had in Sydney CBD generated in excess of 50 enquiries within the first 3 days. Thus, interest remains for practices of all shapes, sizes and locations.
In a first, we were recently contacted by a firm in New Zealand looking to expand into Australia. I have yet to establish whether NZ firms are also finding growth difficult and therefore see the jump across the ditch as a necessary evil or whether they see our markets and firms as underdeveloped and ripe for the picking. It will be interesting to see if this impacts price as I am aware transaction prices in NZ are typically more conservative than our current market. Regardless, if Kiwi firms are about to see Australia as a new target market, further pressure will be placed on demand for practices for sale.
Not so good for purchasers, but a good problem to have as a vendor.