An illustrative end-to-end acquisition

Contents

1. The practice profile
2. Week 1 to 2: first call and indicative range
3. Week 3 to 4: heads of terms
4. Week 5 to 8: due diligence and senior-staff conversation
5. Week 9 to 10: SPA negotiation
6. Week 11: completion and the first payment
7. Week 12 onwards: handover and joint client meetings
8. Month 12: second tranche
9. Year two: the operating rhythm
10. Month 24: retention test and final tranche
11. The tax picture
12. The full numerical picture
13. What is real, what is illustrative

The practice profile

Set the scene with a profile typical of the practices we look at and the principal who often makes the first call.

The principal.

62 years old, ICAEW Chartered Accountant, 36 years in the profession, the last 21 in independent practice. Wants to retire fully within 18 to 24 months. Has had two unsolicited approaches from PE-backed platforms and one from a broker; disliked the structures of all three.

The firm.

Sole practitioner trading through a limited company. Office on a high-street lease in Altrincham, Cheshire (WA14 postcode), two years remaining on the lease. ICAEW practising certificate, clean PII history, no compliance findings in the last decade.

The book.

£400,000 in annual fees. 70 per cent recurring (£280,000 of compliance, monthly bookkeeping retainers, and year-end work locked in by long client relationships). 30 per cent non-recurring (£120,000 of one-off advisory, transactional, and tax-investigation work). 80 active clients, mostly owner-managed businesses with turnover £200k to £3m across Greater Manchester and Cheshire, plus a small property-tax niche. Top client at 12 per cent of fees. No client over 15 per cent.

The team.

Three staff besides the principal. One senior qualified accountant (ACCA, 9 years with the firm, full-time, current salary £55,000). One part-time bookkeeper (5 years, three days a week, £19,000 pro-rata). One part-time admin and receptionist (7 years, two days a week, £15,000 pro-rata).

Week 1 to 2: first call and indicative range

The principal sends a four-line message through the contact form on /contact/, on a Tuesday evening:

"Sole-principal practice in WA14, £400k fees, around 70 per cent recurring, top client at 12 per cent. Considering exit in the next 18 months. I have spoken to one platform and one broker; neither structure works for me. Could we have a confidential 15-minute call?"

A reply lands the next morning offering three slots in the following week. The 15-minute call happens on a Thursday morning, principal to Managing Partner. The conversation covers fees, recurring proportion, top-client concentration, geography, practice type, and timeline. By the end of the call we have told the principal that the book broadly fits us and what an indicative range looks like.

Running the calculator on the five inputs: £400,000 fees, 70 per cent recurring, top client 12 per cent, Cheshire, general practice. Multiplier midpoint 1.20x, range 1.10x to 1.30x. Headline value range £440,000 to £520,000. Mid-point indicative quote £480,000.

The second meeting is scheduled for the following week. Sixty to ninety minutes, in person at the principal's office in Altrincham. We sign a one-page mutual NDA before the meeting. The principal sends a high-level fee book summary in advance: total fees by year for the last three years (showing £382k, £391k, £400k, a healthy slow growth curve), recurring versus non-recurring split, top-ten client concentration, and a one-line description of each staff member.

At the end of week 2 we narrow the indicative range to £460,000 to £500,000 and confirm we want to proceed to heads of terms.

Week 3 to 4: heads of terms

Our solicitor drafts heads of terms over three working days. Five pages. Covers: deal structure (50/25/25), indicative price (£480,000 mid-point, narrowing to a final figure on completion of due diligence), exclusivity (60 days), the principal staff and client commitments to be written into the SPA, the 12-week target completion calendar, and the costs each side carries.

The principal's solicitor reviews. Two reasonable changes are agreed (a tightening of the material adverse change clause and a clarification of the natural-attrition adjustments to the retention test). Heads of terms are signed at the end of week 4.

Confidentiality protocol kicks in. Conversations remain principal to principal. The senior accountant has not been told yet, by design.

Week 5 to 8: due diligence and senior-staff conversation

Due diligence runs across four parallel workstreams.

Financial DD. Last three years of statutory accounts, management accounts, debtors and WIP, full fee schedule by client, recurring versus non-recurring breakdown. We run this internally, no external accountancy fees on our side. Solicitors co-ordinate the data exchange under the NDA.

Client list review. Anonymised list of all 80 clients with annual fees, services, year acquired, and contact tier. We work through the list together to identify the top 20 per cent for joint introduction meetings (16 clients in this case), any clients with current or recent disputes (none), and any clients to off-board at completion by mutual agreement (two, both small, both already drifting).

The senior accountant conversation, week 5. The principal schedules a confidential meeting at 5pm on a Tuesday at the office. Just the two of them. The principal explains, in five sentences, that he is selling the practice, has signed heads of terms, and wants the senior accountant to hear it from him first. Then names us as the buyer. Then offers a meeting with the Managing Partner the following week, ahead of any decision. The senior accountant takes the news calmly, asks two practical questions (about salary and pension), and asks for the weekend to think.

The follow-up meeting happens in week 6, all three present. The Managing Partner sets out the year-one position in plain words: same salary, same role, same pension or better, same hours; long service from the day she started with the practice. We then leave the room for fifteen minutes so the senior accountant can ask the principal privately whether he genuinely thinks this is a good outcome. He says yes, honestly. She decides to come across. The three of us return and shake hands.

Operational DD. Lease, supplier contracts (mainly Xero, IRIS, and a payroll bureau), software licences, PII certificate, ICAEW practice review history, complaints history. We work through the lot in week 7. No surprises.

Junior-staff conversation, week 9. The bookkeeper and the admin are told together at the start of a working day. Same five-sentence framing from the principal. We are present in the room from minute fifteen to answer questions. Both decide to come across, on existing terms.

Week 9 to 10: SPA negotiation

The Sale and Purchase Agreement is drafted by our solicitor and reviewed by the principal's. Forty-six pages including schedules. Standard structure for a UK accountancy-practice transaction.

The substantive negotiations are limited to four points:

• Warranty schedules. What the principal warrants about the state of the practice, with a cap of 30 per cent of the deal value (£144,000) and a basket of £5,000 below which claims do not aggregate. Both standard for a deal of this size.
• Retention test mechanics. The exact wording of the natural-attrition adjustments: clients lost through death, business closure unrelated to the deal, mutual agreement to off-board, and any client where the seller has subsequently taken on continuing professional work. The principal's solicitor pushes for a slightly broader definition of "natural attrition" and we accept it.
• Restrictive covenant. Three-year non-compete within 25 miles of the existing office, and a five-year non-solicitation of acquired clients and staff. The principal will be retired so neither is contentious.
• Transitional services. Day rate of £350 for any time the principal spends in the office post-completion, capped at 30 days across the first six months and 10 further days across months 7 to 12. We agree to give 48 hours' notice for any specific request.

Two rounds of mark-up. Solicitor fees come in at £8,200 per side. Both within the £5k-£15k range we set out at heads of terms.

Week 11: completion and the first payment

Completion is on a Friday. Funds clear into the principal's nominated account on the same working day: £240,000 (50 per cent of £480,000). The disclosure letter is signed alongside the SPA. The warranties are given. The deal documentation is complete.

Joint client letters are prepared on completion day, ready to go out the following Monday. Co-signed by the principal and the Managing Partner. Posted to clients over 65 (28 of the 80 in this case); emailed to the rest. Wording is the principal's, our review is for legal accuracy only.

Week 12 onwards: handover and joint client meetings

The 12-week post-completion handover begins on the Monday of week 12. The principal is present in the office three days a week for the first month, reducing to two days in month two and one day in month three. Pattern by mutual agreement, written into the Transitional Services Agreement.

The 16 joint introduction meetings on top-fee clients are scheduled across weeks 12 to 20. Each is 30 to 45 minutes, at the client's office, with the principal and the Managing Partner. Same script in each: the principal introduces us, we listen more than we talk, the principal then leaves the room for the last five minutes so the client can ask anything privately. Of the 16 top-fee clients, all 16 stay.

Existing software stays. The 38 clients on Xero remain on Xero. The 24 on QuickBooks stay on QuickBooks. The 18 on the practice's own desktop accounts package are left untouched in year one. The two principal off-boards from due diligence are handled in month two: clean, professional, mutually agreed at deal time.

Month 12: second tranche

The second tranche of £120,000 (25 per cent) is paid on the calendar anniversary of completion. No conditions, no clawback. Three-quarters of the agreed price is now in the principal's account, well within a year of signing.

By this point, formal involvement is reduced to one day a week or less. Joint client meetings are complete. Operational handover (lease management, supplier transitions, software, payroll) is finished. The senior accountant is now the day-to-day relationship lead on most accounts.

Year two: the operating rhythm

From month 13 onwards the principal has no formal involvement. Available informally for the kinds of questions only he can answer (a 2018 loss-relief carry-back, a historic disclosure to HMRC), but otherwise retired.

The senior accountant joins the standard Jack Ross annual review cycle in month 14. She has been formally with the firm for 14 months by then; the year-end conversation is the same one we have with our existing staff. Salary uplift in line with the firm's normal cycle. Discussion of taking on more responsibility around the property-tax niche, which we genuinely value because of the previous principal's specialism. The bookkeeper continues on the same three days. The admin continues on the same two days.

Of the 80 acquired clients, two retire their own businesses during year two (natural attrition, both already in their late 70s). One business is sold and the new owner moves to the buyer's existing accountant. One client moves to a competing local firm citing fee dissatisfaction (not deal-related; the previous principal had been carrying her on below-market fees for years). The remaining 76 stay.

Month 24: retention test and final tranche

The retention test calculation, set out in the SPA and audited by both sides:

Numerator.

Recurring fees from the original acquired client base at month 24. Of the original £280,000 of recurring fees at completion, four clients have gone (two retirements, one business sale, one fee-dispute leaver), accounting for £40,000 of recurring fees combined. The two principal off-boards from due diligence are excluded from the calculation per the SPA carve-out. Remaining recurring fees from the original base: £240,000.

Denominator.

Recurring fees from the original acquired client base at completion: £280,000.

Retention.

£240,000 ÷ £280,000 = 85.7 per cent.

Adjustments for natural attrition.

The two retirements and the business sale (£30,000 of recurring fees combined) qualify for the natural-attrition carve-out under the SPA. Adjusted denominator: £280,000 less £30,000 = £250,000. Adjusted retention: £240,000 ÷ £250,000 = 96.0 per cent.

Result.

Adjusted retention is comfortably above the 85 per cent threshold. Final tranche of £120,000 is paid in full, on the calendar anniversary of completion.

The deal is complete. Total of £480,000 paid across 24 months. The principal is fully retired and has been operationally gone for a year.

The tax picture

This section is general guidance. The principal in this illustrative example took independent tax advice from a specialist not engaged on the deal. So should any real seller. Numbers below are illustrative, indicative only, and depend on individual circumstances and current rates.

Asset sale through the limited company. The buyer (us) acquires goodwill, work in progress, fixed assets, and the employment contracts. The principal's company retains its corporate identity, settles outstanding obligations, and distributes the proceeds to the principal as shareholder over time.

• Corporation tax on the gain at company level: roughly 25 per cent on the gain. Goodwill base cost is typically nil or negligible; the gain is broadly the proceeds. Indicative CT cost on £480,000: around £120,000.
• Distribution to shareholder over time: dividend route at the principal's marginal dividend rate, or a final liquidation distribution treated as capital with potential BADR application. Typically the seller spreads distributions across several tax years to manage the marginal rate.
• Pre-completion pension contributions, year minus 2 and minus 1: the principal contributed £40,000 in each of the two years before completion, deductible against corporation tax in those years, shifting £80,000 of taxable profits into pension wealth at full CT efficiency. Subject to annual allowance and taper rules.
• Indicative seller net (illustrative only): approximately £305,000 to £325,000 depending on distribution timing and the seller's other income.

Share sale alternative. If the buyer agrees to a share sale, the principal sells the company itself.

• Capital Gains Tax with Business Asset Disposal Relief: 18 per cent on the first £1,000,000 of lifetime gain (current rate from 6 April 2026), subject to the qualifying conditions (5 per cent shareholding for at least 24 months, employee or office holder throughout, the company's main activity being trading). Indicative CGT cost on £480,000 if BADR conditions are met: around £87,000 plus the annual exempt amount.
• Indicative seller net (illustrative only): approximately £390,000 to £394,000 if BADR applies.

The compromise. Most deals at this scale settle as asset sales with specific accommodations on liability allocation. Where BADR is genuinely available and the buyer is willing, share sale is materially better for the seller. The choice is part of the negotiation.

Standard caveat. The numbers above are illustrative. Rates, thresholds, and reliefs are subject to change. Take independent tax advice from a specialist not involved in the deal, paid for separately, before signing anything binding.

The full numerical picture

Headline price.

£480,000 (1.20x £400,000 GRF).

Cashflow.

£240,000 on day of completion. £120,000 at month 12. £120,000 at month 24, paid in full because retention is comfortably above the 85 per cent threshold on the adjusted basis. £480,000 total over 24 months.

Indicative seller net.

Approximately £290,000 to £310,000 under an asset sale, or £390,000 to £394,000 under a share sale with BADR (BADR rate 18 per cent from 6 April 2026; check current position with your tax adviser). Plus approximately £80,000 of pre-completion pension wealth.

Solicitor fees.

£8,200 each side. Built into the principal's deal budget, not netted against the headline.

Transition.

Twelve-week post-completion handover, then one day a week to month 12, then no formal involvement.

Staff outcome.

All three staff across at completion on existing terms. All three still with the firm at month 24. Senior accountant on a partner-track development conversation by month 14.

Client outcome.

Of 80 acquired clients (two off-boarded by mutual agreement at completion, leaving 78 on the retention base), 76 retained at month 24. The four lost: two retirements, one business sale, one fee-related departure.

What is real, what is illustrative

Real. The 50/25/25 payment structure with a single 85 per cent retention test on the final tranche. The 12-week timeline from first call to completion. The natural-attrition carve-outs in the SPA. The staff and client commitments. The methodology behind the indicative valuation. The shape of the tax-structuring options. The legal fees range. The day-rate Transitional Services Agreement. The Managing Partner being personally on every call from first contact through to month-24 closure.

Illustrative. The practice in WA14 with £400,000 of fees and three staff. The principal's Tuesday-evening email. The senior accountant. The 16 joint client meetings, the 76 retained, the two retirements, the business sale, and the fee leaver. The exact numbers including the £8,200 solicitor fees, the £40,000 pension contributions, and the indicative seller net.

If your own practice profile is broadly similar, the calculator on /value-your-fees/ applies the same methodology to your numbers and returns a range.

Related reading

• A clean structure, not a leveraged earn-out — the 50/25/25 mechanics in detail, with the retention-test sliding scale.
• Practice valuation calculator — five data points, instant indicative range with the 50/25/25 cashflow.
• The 12-week timeline — week-by-week detail of the deal sequence used in this walkthrough.
• Communicating the sale to your team — the operational detail on the senior-staff conversation referenced in week 5.
• Tax-efficient structures for a UK practice sale — the analytical version of the tax section in this walkthrough.

What next

If your own practice profile is broadly comparable to the one in this walkthrough and you would like to run the numbers on your specific book, the on-page calculator is the fastest answer. If you would prefer to discuss it in fifteen minutes, book a confidential call.