We have a purchaser coming in to see us who is possibly going to put an offer on a business that a week ago he was very keen on but after seeing his accountant he isn’t. His comment was that his accountant is paid by him to be negative on whatever he shows him to calm him down so he doesn’t rush into purchasing a business he likes. This is obviously the reason his search for a business still continues after 2 years.

Now maybe this is a good gig for his accountant. Maybe he looks at 20 businesses a year, gets exited about 5 and engages his accountant to carry out a pre-offer due diligence process after which the accountant points out all the risks involved in the business, scares his client off, thereby covering his own bottom in the knowledge that his client will probably be back 4 times that year with other opportunities. A normal SME would expect to pay their accountant about $4k per year to do their annual return, with 5 visits at about $2k each, the firm is better off if the client doesn’t buy a business.

Maybe I am just a little cynical after all this time as a business broker but it sounds to me like a broken record. We keep hearing the same line time and again and these buyers end up wasting more and more of their own money and more and more of the vendors and our time. Don’t get me wrong, it is not all accountants, because when I hear the current version of the same old song, I invite the purchaser to let Paul or I to talk to their accountant because they probably don’t have the whole story, if they are just looking at the numbers. The accountants that are willing to listen to the rest of the story are those that are worth their salt. But too often they are not willing to talk to us or look at further information and are more comfortable hiding away in their cluttered offices playing god in people’s lives with little or no recourse for their inaction.

We had a purchaser mid last year who wished to purchase a business; the vendor liked him and his wife and they had the skill set to take the business in question to the next level. It was a very good business and there were 4 purchasers willing to make offers of which they were one. They were told by the owner if you make a fair offer like the rest by a given day, the vendor would sign their offer. They met for the 3 times with their accountant and two days after the deadline they were instructed by their accountant to offer $200k less than the other offers. There was no science offered for this approach, the accountant would not talk to us about his thoughts, and the vendor’s comment regarding their lower offer was logically “we like them but not that much” The purchaser is still looking for a business, has taken on part-time work and is pestering me to catch up for a coffee to talk about what we have coming up. But do I want to subject my vendor clients to a purchaser who has demonstrated that he doesn’t have the ability to listen to accountant’s advice but then, make the final decision himself.

Now this post isn’t meant as a rant but more a comment on the fact that a business should be valued on more than just the numbers. A business value should be based on Future Maintainable Earnings and the mitigation of the risks to that income. So as a professional adviser shouldn’t you make yourself privy to the facts before you give your advice, especially if you are charging your client for it and shouldn’t you make yourself available for scrutiny, so the client gets the best advice?

Seems to me that too many accountants hide behind the disclaimers and don’t look at all the facts before they pass their judgement.

There are very few quality businesses available to purchasers at any time in NZ and we accept, and in fact encourage, purchasers to engage an accountant for pre-purchase and due diligence advice. But what we would hope is that the accountant in question becomes part of the process and as such gains a proper understanding of the process and at that time can give his/her client the best advice on whether they think they should proceed on the transaction in question.

Since I have drafted this post we have had another deal fall over because the accountant in question has made some assumptions without asking for any verification and subsequently has halved the profit represented, and then told his client not to buy the business. All of this is in isolation and the assumptions were wrong and could have been answered in a 2 minute call. We are trying to put the deal back together but often in this case for the buyer the worm has turned. So again, the buyer misses out, the owner doesn’t sell his business, we as the brokers start again, but the accountant gets paid!