A/C businesses cheap source of clients: Radar Results
Financial planners are buying up accounting practices as a cheap source of new clients, according to financial services mergers and acquisitions specialists Radar Results principal, John Birt.
Birt told Money Management that demand for accounting businesses was "higher than ever", with financial planner driving values upwards of $4 million in some major capitals.
"It's a cheap way of buying clients," he said.
"Normally financial planning revenue can range from two-times to four-times the multiple, but if you buy an accounting business for one-time [the multiple] you can turn accounting client into financial planning clients.
"So effectively you can have an increase in the accounting business revenue of double or triple the value of the business you buy over the next three to five years depending on how many accounting clients you can turn into financial planning clients."
Birt said many financial planners who had already bought into the accounting sector were hungry to buy more practices.
"They want more and more accounting businesses, and even now we're seeing some planners happy to pay a $4-5 million purchase price for a pretty good size accounting practice," he said.
"We've got clients in Sydney who've bought accounting practices and they've probably got somewhere between $1-2 million in accounting fees coming in and they want to increase that."
Recommended for you
A Victorian accounting firm – in which Count holds a 40 per cent equity stake – has announced the acquisition of an accounting client book through a $1.4 million transaction.
Australian Ethical has reported its net profit after tax (NPAT) fell 15% to $9.6 million for the year ended 30 June, while its underlying profit after tax (UPAT) declined 7% compared with the year prior, to $10.3 million.
Insignia Financial has announced a 59% increase in its underlying net profit after tax (UNPAT) to $234.5 million in FY22.
Having completed their educational qualifications, those advisers who remain in the industry are reporting being “run off their feet” with new clients.
