Berkeley Hamilton acquired by Baldwins

Buyers of accountancy practices underwrite recurring fee income above all else. The specific tests are the proportion of fees that recur annually through compliance work, average client tenure, fee concentration across the top ten clients, and historical fee retention when a partner has previously departed. A practice where relationships sit across the team rather than with one individual carries materially lower transfer risk and attracts a stronger multiple. Acquirers also examine whether any service line cannot easily be replicated in-house — a payroll bureau, a specialist tax niche, or proprietary software — because that is what turns a fee list into a strategic asset. Berkeley Hamilton's in-house payroll software was precisely that kind of differentiator.

Two methods are used in parallel. Smaller practice deals are still frequently quoted as a multiple of recurring gross recurring fees (GRF), often with a portion deferred and adjusted against actual fee retention over the first 12 to 24 months. Larger transactions, and almost all private equity-backed platform deals, are priced on adjusted EBITDA after normalising partner remuneration to a market salary — a step that materially changes the reported profit of an owner-managed practice. Which method dominates depends on the buyer type, so a competitive process that puts consolidators, platform acquirers, and neighbouring independents in front of the same information is the most reliable way to establish maximum defensible value. Founders selling in UK mid-market M&A should expect to defend the adjustment schedule line by line.

A software or bureau capability changes what the acquirer is buying. Fee income from compliance work is valuable but replicable — any group can hire accountants. A working system that already processes live client volumes is not replicable on the same timescale, and it can be deployed across every other office in the acquiring group, so the value created is a multiple of what it generates in the target alone. It also diversifies the revenue base away from time-based billing towards something closer to a recurring service subscription, which most buyers view as a lower-risk earnings stream. For sellers, the practical point is that this value is only recognised if it is presented as a distinct asset with its own economics rather than absorbed into the general practice numbers.

Acquisition is faster and cheaper than opening an office from scratch. A regional practice delivers an established client base, a qualified team, and local market credibility on day one, in a location where the acquirer has none of the three. The financial logic is multiple arbitrage: a group trading at a higher earnings multiple acquires smaller practices at lower multiples and the combined entity is revalued upwards, before any cost synergy. Regulatory and technology cost inflation reinforces the pattern by making the sub-£5m independent practice progressively harder to run profitably. Baldwins used exactly this approach, opening six new offices in 12 months through acquisitions including Davisons, Cassons, and Booth Ainsworth, before itself being acquired by HgCapital in 2016.

Start 12 to 24 months before going to market, because the evidence a buyer wants is historical rather than declared. Reassign client ownership so that the senior partner is not the named contact on the largest relationships, and let the handover season for a full compliance cycle. Document the work — engagement letters, standard procedures, file management — so the practice reads as a system rather than a set of personal habits. Formalise the second tier: if a manager is running client relationships in practice, give them the title and the authority in writing. The measurable test a buyer applies is whether fee retention held when a partner previously stepped back. Practices that can show that number typically avoid the deferred consideration and clawback structures imposed on those that cannot.

Confidentiality matters more in professional services than in most sectors, because the asset can resign or move its business the moment confidence drops. Practical controls include routing all buyer contact through the advisor rather than the practice, releasing information in stages against signed non-disclosure undertakings, using a blind profile that does not identify the firm at first approach, and keeping the internal circle to the shareholders and one trusted finance contact until heads of terms are agreed. Approaching a smaller number of genuinely credible buyers rather than running a broad auction reduces exposure considerably. Plan the staff and client announcement before completion, not after: in this sector the communication is part of the deal, and Berkeley Hamilton's shareholders were able to confirm at announcement that all 25 staff and the incumbent partners were staying.

The outcome depends on whether the buyer wants an operating office or a fee list. A group opening its first location in a town needs the team and the premises, so staff usually transfer and the office continues; a buyer with an existing branch nearby may plan to merge sites, which changes the answer entirely. Ask directly, early, and test the answer against what the buyer did in its previous three transactions rather than what it says in the process. Clients typically see continuity of the same contacts alongside access to specialist tax and advisory services the independent practice could not offer. Where continuity matters to the seller, it belongs in the deal terms — staff retention, office commitments, and brand treatment are all negotiable, and are far easier to secure before heads of terms than after.

Three tests separate advisors in this sector. First, fluency in how professional services fee income is actually valued — an advisor who cannot argue the partner remuneration normalisation and the fee retention evidence will concede value in negotiation. Second, a completed track record with the specific buyer types active in your category, since consolidators, private equity platforms, and neighbouring independents each run a different process. Third, independence: an advisor with no audit, tax, or referral relationship to protect can tell you not to sell when the timing is wrong. Ask who will personally run the process after the pitch, and ask for completed transactions rather than mandates won. CapEQ is a Certified B Corporation, independently assessed on governance and client accountability, and every engagement is led by a Partner who has owned and sold businesses.