Q1 2024 Accountancy Practice M&A Market Update: Buckle Up, It Will be a Busy Year

As the first quarter of 2024 draws to a close, we can certainly confirm that, in terms of announcements, it was a record breaking quarter, for what naturally is usually a quiet time for M&A. This is due to tax return season and then the inevitable break that many practitioners look to take post 31st January to recharge the batteries. For me, however, the sea change in recent months is that throughout the entire accountancy practice ‘eco system’ is the openness to sale or merger discussions, compared to last year.

The same drivers for the activity remain in talent attraction/retention, lack of internal succession options, burnout or exhaustion of Partners running a firm and wishing to relinquish some of the heavy lifting. And, of course, good valuations currently on offer are an allure to look at realising value built within your practice, either on full or partial sale.

More recently, mid-sized firms whom had firmly took up the position of remaining independent and were not swayed by the ‘FOMO effect’, are now seriously rethinking their position from a technology and AI perspective where there is a real threat of being left behind versus their peers. As part of a larger group or network, there will be greater resources to invest into technological advancements, including AI.

Many firms within the ￡3-￡15 million bracket are already acquired, being acquired or acquiring themselves.

Many independent firms are worried if they would be able to compete in that area with limited cash pools to invest. As alluded to, this worry is softening the position of many leadership teams of Top 100 firms to not have exploratory discussions with suitable parties, or with ourselves, to understand their options and the various models out there. To highlight this point c40 of the Top 100 have now been acquired, or taken on investment.

The fight for acquiring mid-sized firms amongst the consolidators, or investment backed practices, is fiercer than ever. Many firms within the ￡3-￡15 million bracket are already being acquired or acquiring themselves, the ‘pool’ of opportunities is reducing rapidly. This simple “supply and demand” dynamic has recently led to a slight up-lift in multiples for certain firms between ￡5-15 million revenue range than has been seen to date. I suspect this ‘bubble’ will remain for the duration of 2024 while the large platforms are all fishing in the same pond.

Once opportunity in that area of the market ‘runs dry’, it will be very interesting to see the jostling and manoeuvring between the consolidators and platform practices as they set sights on each other in the coming years. Who will be the first to acquire another buy and build platform? I am sure it will have a similar impact as Cooper Parry’s acquisition of many offices of Haines Watts did last year. That certainly grabbed many people’s attention!

Turning focus to the sole practitioner up to c.￡2-3 million revenue practices, all of the drivers mentioned earlier in this article are very much at play, and in some circumstances greater amplified in the sub-￡3 million and one or two partner firms. There is no sign of things becoming easier with cost inflation, very competitive talent market, greater compliance red tape and technology adoption. Many well-run smaller independent firms are looking to acquire in this space, alongside local firms and the consolidators looking for ‘bolt-ons’ to larger offices nearby. Local firms and smaller independents are providing a different offering to the consolidators or investment backed platforms.

There is a vast range of options available to both acquirers, sellers or those wishing to merge or embark on the ‘next chapter’ of their business or personal and professional life.

AJ Chambers has been involved in numerous processes and discussions so far this year, in a variety of different practice profiles across the UK and Ireland. From retiring sole practitioners through to c.￡16-22 million revenue firms joining larger investment backed platforms. February was our busiest month on record in terms of incoming enquiries and wishes to set up exploratory conversations to understand options. The end of tax season was the starting gun with many screaming out “I am not going through that again!”

There is a vast range of options available to both acquirers, sellers or those wishing to merge or embark on the ‘next chapter’ of their business or personal and professional life. The flexibility and pragmatism on approach to deals in the professional services arena is of great benefit. However, as with the constant scrolling on Netflix due to the sheer amount of options of things to watch, it does make the decision process as someone looking to sell or merge significantly more confusing, with the potential of much time being wasted.

This is why it is important to engage with M&A consultants who are immersed within the sector and have a very strong grip on the market, knowledge of the various models and hold good relationships with the various parties whom you could speak with. But, most importantly, listen and understand your objectives and requirements, to ensure only suitable parties are introduced. This ensures the right options are placed before you and any process is navigated as smoothly and as stress-free as possible.

AJ Chambers are well equipped to advise you of the options open to you, and ensure you achieve the objectives you would wish to reach for any next chapter of your business.

AJ Chambers is fully equipped to assist

AJ Chambers work closely with numerous funds, large networks and other independent acquirers of various sizes who?are actively looking for great opportunities in the market at the moment. If you are an Accountancy Practice owner and would like to discuss any of the above further, including your exit plans, merger or indeed growth plans via acquisition, please get in touch for a confidential, no obligation conversation. We are well equipped to advise you of the options open to you, and ensure you achieve the objectives you would wish to reach for any next chapter of your business.

Due to all of the above, 2024 is set to be an extremely busy year within the accountancy practice sector. I certainly feel it will be a pivotal year, alongside 2025, in shaping the landscape of the market before the next big events due to come once PE and the investors come to the end of their cycle and need to exit themselves.

Buckle up, it will be a fast and furious year!

Our team has a wealth of combined experience in this market and welcome existing and new clients to contact us. We can hold confidential, discreet and no obligation discussions to explore how we may work together.

Please contact James Gosling at [email protected]