Most business owners eventually come to a crossroads when ownership change is desirable or essential and significant decisions need to be made. In this article, Nick Paterno, managing partner of Sidcup-based chartered accountants McBrides, tells how they sold their business in 2004, only to buy it back six years later – and shares some of the lessons they learned along the way.
The year is 2003. Tony Blair is Prime Minister, Gordon Brown is Chancellor. The UK economy is steady, the stock market having recovered somewhat since the sharp falls experienced in 2001 and 2002. McBrides chartered accountants has celebrated its 31st anniversary. It’s a thriving accountancy practice, employing over 60 people, but faces the classic problem of many other mature owner-managed businesses – the impending retirement of a number of key personnel and an increasingly competitive market place. Managing partner Nick Paterno takes up the story:
“We had grown to a size where we were bigger than many other local independent practices serving south east London, Kent and beyond, but not as large as those top 30 firms with whom we were competing at the top end of our target market.
What were we to do? The options were to make ourselves bigger through the acquisition of other practices or by taking on specialist consultants, or to merge with a larger practice and gain the benefit of their critical mass.
We are business advisers, used to helping clients assess their options, find suitable buyers or partners, so it was second nature to assess our options and develop a strategy.
We knew the acquisition market well, put out some feelers and established that there were no other practices or individuals in a position to sell or join us.
We began recruiting replacements. Here we were faced with a particularly difficult challenge. One of our impending retirements was our very experienced and highly regarded tax partner. Tax is not the whole story, but it’s a vital part of the service jigsaw and our business needed to excel at tax – at the highest level. We knew that finding a replacement of the right calibre would be tough. So we interviewed many candidates – but no one fitted the bill …
We explored a number of merger options but the “fit” was not quite right. At the time, accountancy ‘consolidators’ like Numerica and Tenon had been rapidly acquiring small and medium sized accountancy practices across the UK. The model was compelling, but we had concerns. Then we received a call from Vantis, an up and coming ‘integrator’ formed from the merger of 4 founder firms, listed on the Alternative Investment Market and with ambitious growth plans.
Vantis offered an attractive route for our people looking to retire and seeking to capitalise on the goodwill built up over the years. For the team that remained, there was the attraction of the extension of services through utilisation of Vantis specialists, which would help us become more competitive in our marketplace.
McBrides becomes Vantis Sidcup
We sold our business to Vantis in April 2004. This released the partners who wanted to retire, and presented us with an immediate solution to one of our problems, in that we gained an excellent new tax partner Terry Baldwin – who transferred from their London office. Terry lives locally, has a great track record, and is popular with clients.
In other respects, the core business remained much the same. The people and office remained unchanged. What did change was our branding and, over time, our systems and processes which were integrated with the rest of the group.
The integration with Vantis took longer than we expected. We found that our own systems and processes were often more advanced than the organisation to which we now belonged. Vantis was growing so fast, its integration challenges were huge and it took some years for them to catch up.
On the plus side, we found that the enlarged organisation offered development opportunities for all our people, and they seized the chance to gain additional skills and experience. As a team, we established some good contacts with other experts across the group, relationships that continue to this day.
So why, six years on, did we buy back the business? Whilst the core accountancy businesses across the group were generally strong and profitable, other non-core activities were draining group resources. There was a cash and resource squeeze, and when it became clear that Vantis was in terminal decline and that we needed to regain control of our own business, and our own destiny – the whole partner team was unanimous in its decision to undertake an MBO.
So, in the space of 14 days from start to finish, we collaborated with 4 other like-minded Vantis offices and assembled a deal which was successfully concluded as Vantis went into administration. Vantis Sidcup became McBrides again!
New McBrides and lessons learned
Since the MBO we have talked to many clients and contacts and the reaction to our news has been overwhelmingly positive. The strength of the McBrides brand has shone through; even six years on we have found that name recall is high. This is in stark contrast to that of Vantis, which as a new name in the accountancy market some 8 years ago, had not penetrated into our market to any degree.
I believe we have also gained a new-found confidence in ourselves having been able to benchmark ourselves against other offices or divisions within a top 20 firm of accountants. We now have perspective that tells us we can compete with the top 20 firms in terms of client service, technical ability, pro-activity and guidance for our clients through their business lifecycle.
Top tips
So, what tips would we pass on to anyone looking to merge or become part of a larger organisation?
- Understand and research your suitor and where they have come from. Is their model established or is it still developing? If the model is not established, have you assessed the risks adequately?
- Ensure that the suitor will add value to your clients and customers and internal systems. Do not assume that biggest is best – that is not always the case.
- Compare your business against similar businesses and larger competitors before you proceed. How much are you bringing to the party, and how much do you stand to gain
- Consider options to retain your identity in some way even if you do proceed. It is easy to allow yourselves to be subsumed within your new identity but this is potentially at the risk of your local business or market segment.
- Have confidence in your own business and abilities and proceed only when you are convinced that joining forces with your favoured suitor will work to the benefit of yourselves, client, employees and other stakeholders.
For our own part, we intend to make the most of being independent and autonomous. This is a good feeling, one that we have missed, and that we intend to grow for the good of our clients and our staff.
For further information on McBrides and its MBO contact Nick Paterno by completing the form on the left-hand side of this page.