Larger practices look to succession planning

Larger practices with over $15.5 million in annual recurring revenue may find it a more difficult seller’s environment as they face complex issues, according to Centurion Market Makers.

Principals Wayne Marsh (pictured) and Chris Wrightson said they noticed an increase in succession planning enquiries from larger practices. They said these practices might find it a more difficult seller’s environment than smaller practices with less than $750,000 in annual recurring revenue, which were in greater demand.

“Vendors of smaller practices attract a lot of buyer interest from the many similar-sized acquiring practices,” said Wrightson, whereas larger practices required significant debt funding if the buyer was a private practice, he added.

Wrightson and Marsh said there had been a 200 per cent increase in enquiries since July, although few had resulted in action as most practices maintained a ‘wait-and-see’ approach. Most remained indecisive, said Marsh, as they waited “until they know what the new world and the rules look like”.

Larger practice principals were enquiring more about internal succession, external acquisition and what to do in the case of multiple-owner practices, Marsh and Wrightson stated. Marsh said one thing that larger practices were certain about was that the process was not a quick one, since larger practices tended to be more complex.

Wrightson said larger practices were owned in a variety of tax structures, often with multiple shareholders or partners, each with different succession and financial needs and expectations.

“A consequence of formal business succession is that business owners get to clearly map put their future pathway, understand each other’s position and the mutual decisions they need to make to achieve their aims,” Wrightson said.