Buying an Accounting Practice vs Buying a Fee Book: What Are You Actually Acquiring?
Updated: Sep 30
Buying an accounting practice and buying a fee book can look similar on a broker listing. Commercially, however, they can be very different acquisitions.
If you are buying an accounting client book, the key question is whether you are acquiring only a portfolio of client relationships and fees or a broader operating practice.
A practice may be advertised by reference to its annual fees, asking price and number of clients.
But before comparing fee multiples or deciding whether the price looks attractive, there is a more basic question:
*What are you actually acquiring?*
You may be looking at an entire operating accounting practice. You may be buying a parcel of client relationships that will be absorbed into your existing firm. Or the transaction may sit somewhere between the two.
Understanding that distinction early can change how you think about the price, staffing, transition, client-retention risk, integration and finance.
The short answer
A fee book, sometimes described as a client book or fee parcel, generally centres on a defined group of client relationships and the recurring fees and goodwill associated with them.
An accounting practice acquisition can involve a much broader operating business — potentially including clients, employees, systems, premises, equipment, branding, procedures and other infrastructure.
But neither term tells you exactly what is included.
The sale agreement ultimately determines what is transferring.
That is why one of the first questions when exploring an accounting practice acquisition should be:
*What exactly is being sold?*
What does buying an accounting fee book actually mean?
A fee book acquisition will commonly focus on a nominated group of clients currently generating accounting, tax, compliance or advisory revenue.
Depending on the transaction, the buyer may be acquiring or receiving the benefit of:
• the goodwill associated with those client relationships;
• the opportunity to continue servicing the clients;
• recurring accounting and taxation fees;
• relevant client records and work history, subject to professional, confidentiality and privacy requirements;
• work in progress where specifically included;
• debtors where specifically included;
• vendor introductions to clients;
• an agreed handover period; and
• restraints or other arrangements intended to support the transition.
What may not be included is equally important.
A fee-book transaction may not include:
• employees;
• office premises;
• software subscriptions;
• equipment;
• the vendor's trading name;
• telephone numbers or domains;
• administration infrastructure; or
• management capability.
This is why fee-book acquisitions are often particularly relevant to existing accounting firms.
The buyer may already have the office, staff, systems and management platform required to absorb another group of clients.
In that situation, what the buyer principally needs from the vendor is a successful transfer of client relationships and revenue.
You are not literally buying the clients
The term client book can create the wrong impression.
Clients are not assets that automatically become the buyer's clients because a sale agreement has been signed.
Clients can decide whether they want to continue with the new accountant.
That makes the strength and transferability of the relationships particularly important.
A fee book with $500,000 of historical annual revenue does not necessarily mean the buyer will receive $500,000 of ongoing revenue after settlement.
Questions quickly arise:
• How long have the clients been with the vendor?
• Who actually manages the relationships?
• How dependent are they on the outgoing principal?
• How will the buyer be introduced?
• How much transition support will the vendor provide?
• Are there significant clients that may be difficult to retain?
These issues become important during due diligence.
At Stage 1, however, the objective is simply to recognise that historical fees and transferable client relationships are not necessarily the same thing.
What are you acquiring when you buy an entire accounting practice?
Buying an entire practice usually means acquiring a broader operating platform.
Depending on the transaction, that may include:
• the existing client base;
• recurring accounting and advisory revenue;
• employees;
• managers or senior accountants;
• systems and software;
• established workflows and procedures;
• premises or rights under a lease;
• furniture and equipment;
• telephone numbers, domains and other business infrastructure;
• the firm's brand or trading name;
• work in progress;
• debtors;
• referral relationships;
• goodwill; and
• vendor transition support.
In other words, the buyer may be acquiring not only revenue, but the organisation that currently produces and services that revenue.
That can make the acquisition very different from buying a fee book.
For example, an accountant acquiring an entire practice may inherit an established team capable of servicing the client base from settlement.
A buyer acquiring a fee parcel may instead need to service all of those clients using the buyer's existing team.
The headline revenue could be similar.
The operating implications may be completely different.
Practice versus fee book is not the same as asset purchase versus share purchase
This distinction is easily confused.
Practice versus fee book describes the commercial scope of what you are acquiring.
Asset purchase versus share purchase describes how the legal transaction may be structured.
They are separate questions.
For example, a buyer could acquire substantially all of the operating assets and goodwill of an accounting practice without buying the shares in the vendor's company.
Alternatively, a transaction may involve acquiring shares in the entity that operates the practice.
The legal, tax and liability consequences can differ materially, so the structure should be reviewed by the buyer's legal and tax advisers.
At the exploration stage, however, you do not need to solve every structural question.
You simply need to avoid assuming that buying the practice automatically means buying the vendor's company.
Do the employees come with the practice?
Sometimes.
But the words accounting practice for sale do not tell you whether staff are expected to move to the buyer.
This should be established early.
Ask:
• How many people currently work in the practice?
• What are their roles?
• Which employees manage important client relationships?
• Which employees are expected to remain?
• Will employment be offered by the buyer?
• Are there key employees whose departure could materially affect the acquisition?
Where employees move from one business owner to another, Australia's transfer-of-business rules can affect employment arrangements and certain employee entitlements. The specific consequences depend on the circumstances and should be reviewed appropriately.
From a commercial perspective, the important Stage 1 question is simpler:
*Does the revenue come with the people required to service it, or will you need to provide those people yourself?*
What about the client files?
Do not assume that exploring an acquisition means you will immediately receive a spreadsheet containing every client's name, contact details, fees and personal information.
At an early stage, much of the information may appropriately be provided on an aggregated or de-identified basis.
For example, you may initially receive information about:
• total number of clients;
• average fees;
• revenue by service type;
• top-client concentration without identifying the clients;
• business versus individual clients;
• recurring versus non-recurring fees; and
• historical client losses.
Australian privacy and professional confidentiality obligations can affect how client information is handled during a proposed sale. Buyers and sellers should obtain advice appropriate to the transaction.
So the absence of a complete named client list at the beginning does not necessarily mean the vendor is being evasive.
At Stage 1, aggregated information may be enough to decide whether the opportunity deserves further investigation.
Two acquisitions with the same revenue can be completely different
Consider two hypothetical opportunities.
Opportunity A — $600,000 fee book
The vendor is selling approximately $600,000 of recurring fees.
There are no employees transferring.
There are no premises.
The buyer will use its existing software and systems.
The vendor will introduce clients and assist with the handover for an agreed period.
The buyer needs enough internal capacity to absorb the additional work.
Opportunity B — $600,000 accounting practice
The practice also generates approximately $600,000 of annual fees.
However, three employees are expected to remain.
The practice has its own premises, systems, workflows and administration processes.
The seller intends to provide a transition period before exiting.
These opportunities have the same headline revenue.
But they are not the same acquisition.
The buyer's future staffing costs, integration requirements, management responsibilities, transition risks and sustainable profit may all differ.
That is why comparing opportunities only by price as a multiple of fees can be misleading.
First understand what sits behind the fees.
What should you clarify before focusing on the asking price?
At the beginning of the process, you do not need a 100-page due-diligence report.
You need clarity around the commercial perimeter of the transaction.
Useful questions include:
The clients
• Is the whole client base being sold?
• Are any clients being retained by the vendor?
• Are particular categories of clients excluded?
• Approximately how much revenue is recurring?
• Are there significant client concentrations?
The staff
• Are employees expected to transfer or remain?
• Which people manage important relationships?
• Are any employees critical to the operation of the practice?
The assets and infrastructure
• Are premises included or is there a lease?
• What happens to software and systems?
• Is equipment included?
• Does the business name or brand transfer?
• What happens to telephone numbers, email addresses and domains?
The financial items
• Are debtors included?
• Is work in progress included?
• How will work completed around settlement be treated?
• Are there other assets or liabilities that form part of the proposed transaction?
The vendor
• What handover is proposed?
• Will the vendor introduce clients personally?
• Will the vendor remain involved after settlement?
• What does the vendor intend to retain?
The transaction
• Is this intended to be an asset sale, share sale or another structure?
• Is the sale agreement already being drafted?
• Has the vendor proposed retention adjustments, deferred consideration or other conditions?
You do not need every answer immediately.
But you should understand enough to know what opportunity you are actually investigating.
Why does the distinction matter for acquisition finance?
The lender may also look at a fee-book acquisition differently from the purchase of an entire operating practice.
With a fee-book acquisition, questions may include:
• Can the buyer retain the clients?
• Does the buyer's existing practice have enough staff capacity?
• What additional costs will arise?
• How will the clients be integrated?
• What does the combined practice look like after settlement?
With an entire practice, the lender may place greater emphasis on:
• sustainable earnings;
• employee continuity;
• owner dependence;
• normalised operating costs;
• client retention;
• vendor transition; and
• the business's ability to continue generating cash flow after the owner leaves.
Neither structure is automatically better or easier to finance.
The lender is ultimately trying to understand what is being acquired and whether the resulting business can sustainably support the proposed debt.
The Stage 1 takeaway
When an opportunity first arrives, it is easy to jump immediately to:
*What multiple are they asking?*
A better first question is:
*What does the asking price actually buy me?*
Are you acquiring a group of client relationships that must be integrated into your existing practice?
Or are you acquiring an operating firm with people, systems and infrastructure already around those clients?
Are staff included?
What happens to work in progress and debtors?
What handover will the vendor provide?
What is being retained?
You do not need to resolve the entire transaction at this point.
The objective of Stage 1 is simply to establish the headline facts and decide whether the opportunity deserves further investigation.
Once you know what is actually being sold, the asking price starts to become more meaningful.
Frequently asked questions
Is buying a fee book the same as buying an accounting practice?
Not necessarily. A fee-book acquisition generally focuses on a portfolio of client relationships, recurring fees and associated goodwill. Buying an entire accounting practice can involve a broader operating business including employees, systems, premises, processes and other infrastructure.
Is an accounting fee book the same as a client book or fee parcel?
The terms are often used loosely in the market to describe a group of accounting clients and the fees associated with them. However, the label itself does not determine what is legally included in the transaction. Buyers should review the proposed inclusions and sale agreement.
Does buying an accounting fee book include the employees?
Not automatically. Some transactions include employees or arrangements for particular staff to move to the buyer, while others involve only the client relationships and associated fees. This should be clarified early.
Do all clients automatically become clients of the buyer?
No. Clients remain able to choose their accountant. The vendor's client relationships, proposed introduction process and transition support can therefore be important to the commercial value of the acquisition.
Is a fee book easier to finance than an entire accounting practice?
Not necessarily. A lender may consider the quality and retention of the acquired fees, the buyer's existing practice, servicing capacity, purchase price, profitability, transition arrangements and overall transaction structure. A smaller transaction is not automatically a lower-risk transaction.
Considering an accounting practice acquisition?
Fairlane Finance works with accountants considering the acquisition of a fee book, client parcel or entire accounting practice.
We can help you explore how lenders may view the proposed acquisition, purchase price, sustainable earnings, buyer contribution and funding structure before you make significant financial commitments.
*BOOK A CONFIDENTIAL CONVERSATION*
This article forms part of Fairlane Finance's Accounting Practice Acquisition Hub — Stage 1:
https://www.fairlanefinance.com.au/accounting-practice-stage-1
General information only. This article does not constitute legal, tax, accounting or financial advice. Buyers should obtain advice appropriate to their circumstances. Lending criteria, terms and conditions vary between lenders.
