Accounting firms turn to acquisitions for growth, report reveals
Around a quarter of accounting firms are looking to acquire another firm in the next 12 months, according to a recent NAB report.
The 2024 NAB Accounting Financial Planning report has indicated that 28 per cent of accounting firms plan to purchase all or part of another business in the next two years.
Acquisition was also rated as the third most likely method of growth in the next 12 months.
With only 15 per cent of firms looking to sell at the moment, it is currently a seller’s market with more firms competing over fewer assets, the report said.
NAB professional services banking executive Adam Holster said despite the increased demand, buyers are still making sure it’s the right fit strategically and culturally.
“They want to get a good understanding of the firm and its key people; it’s critical to know how two will integrate into one,” said Mr Holster.
The biggest consideration when deciding on an acquisition target is ‘cultural fit’, according to the report.
While acquiring people was the second-biggest motivator for acquisitions, Mr Holster said firms won’t buy simply to increase headcount – the target firm has to have people with the capability the buyer needs.
Firms looking to make an acquisition are undertaking careful planning to ensure they have everything in order before they start the acquisition strategy.
“It begins with strategic alignment between partners and other stakeholders on the type of acquisition the firm is pursuing, as well as lining up advisers and financing well in advance,” said Mr Holster.
The report said there is currently a higher proportion of regional sellers, which may present an opportunity for metro firms seeking to replicate their success through geographic expansion.
Naomi Stuart, state business banking executive, regional and agribusiness at NAB, said while regional firms weren’t planning as many acquisitions, they would consider an acquisition where it offers good synergies, such as complementary services.
“We’ve seen more accounting firms tuck in an acquisition like a financial planning or broking firm, using it as an opportunity to provide a fuller suite of offerings and further cement customer loyalty,” she said.
A lack of succession planning across accounting firms
The NAB survey indicated that only half of all firms have a formal or written succession plan.
“Building a business is building an asset; if you’re not sure what’s going to happen at the end, that creates a lot of uncertainty,” said Mr Holster.
Sellers increasingly staying in the business
The data from the survey also shows that many sellers plan to stay on post-sale with an equity interest, reflecting changing attitudes within the profession towards retirement.
“There’s no one best way when it comes to succession planning,” said Mr Holster.
“You no longer have to walk out the door aged 65 and never come back. And while many are putting off succession planning, there are also more palatable options that weren’t available say ten years ago, such as selling your stake down to five per cent and maybe working half a day a week.
The motivation for these arrangements is not necessarily financial pressure but enjoyment of the work for some, he said.
Mr Holster said that succession planning is not just about retirement but a tool to help current and prospective employees see their future pathway with the firm.
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