Dorset Accountancy Practice (RA 31945)

Persona	Q	P	I	Verdict	Key Argument
Financial Analyst	6	5	5	Investigate	Don't bid until info pack confirms GRF >= GBP 230k and qualified staff; if both resolve, negotiate to 1.0x and this becomes Promising
Operations Expert	6	6	5	Investigate	Solid practice with real automation upside but software stack question must be answered — legacy + no qualified senior + low-end GRF is the scenario where the investment case breaks
AI Engineer	6	6	5	Investigate	Right sector, right price, right upside signal — three binary gate questions (software, practising cert, verified GRF) must be answered before any offer
Risk Manager	5	5	4	Investigate	Don't pay GBP 275k for a bracket — verify qualified staff and GRF, then offer 1.0-1.1x what the accounts actually show
Search Fund Veteran	6	5	5	Investigate	Four data gaps are too material to underwrite at GBP 275k, but observable signals are strong enough that this could upgrade to Promising on a single call

A 20-25 year established accountancy practice in Dorset serving predominantly locally-based owner-managed businesses and individuals. The practice employs 3-5 staff, all with 10+ years tenure — an exceptionally stable team. The seller is retiring (first time to market) and describes being "entirely flexible" on transition arrangements. The practice is capacity-constrained, "regularly turning away new enquiries" — a rare positive signal indicating proven demand exceeding current delivery capacity. GRF is stated as a GBP 200,000-300,000 bracket with circa GBP 250,000 headline; detailed financials, software stack, and client breakdown are gated behind the information pack.

Deal Structure (Recommended)

Item	Amount
Target price (negotiated)	GBP 250,000 (1.0x at confirmed GBP 250k GRF)
Transaction costs (~4%)	GBP 10,000
Total capital required	GBP 260,000
Buyer equity deployed	GBP 150,000
Working capital reserve	GBP 50,000
Seller finance (40% of price)	GBP 100,000 (5yr @ 7%)
Annual debt service	GBP 24,000
Completion payment	GBP 150,000 (60%)
Earn-out holdback	GBP 100,000 over 12-24 months, retention-linked

P&L Comparison

	Year 0 (Pre-Automation)	Year 1 (Transition)	Year 3 (Post-Automation)
Revenue	GBP 250,000	GBP 250,000	GBP 272,000 (+9%)
Staff costs (3 FTE + NI/pension)	(GBP 108,000)	(GBP 108,000)	(GBP 75,000) (natural attrition)
Practice Manager uplift	—	(GBP 4,000)	(GBP 4,000)
Owner/buyer draw (remote)	(GBP 35,000)	(GBP 35,000)	(GBP 35,000)
Rent	(GBP 12,000)	(GBP 12,000)	(GBP 12,000)
Software + AI stack	(GBP 9,000)	(GBP 14,000)	(GBP 17,000)
Other overhead	(GBP 9,000)	(GBP 9,000)	(GBP 9,000)
EBITDA	GBP 77,000	GBP 68,000	GBP 120,000
Margin	30.8%	27.2%	44.1%
Tax (~22-25%)	(GBP 17,000)	(GBP 15,000)	(GBP 30,000)
Debt service	(GBP 24,000)	(GBP 24,000)	(GBP 24,000)
FCF to equity	GBP 36,000	GBP 29,000	GBP 66,000
Cash-on-cash	24.0%	19.3%	44.0%

Returns Summary

Metric	Value	Threshold	Status
Year 0 cash-on-cash	24.0%	>15%	PASS
Year 3 cash-on-cash	44.0%	>40%	PASS
Payback period	~2.8 years	<3.5 years	PASS
DSCR Year 0	3.2x	>2.0x	PASS
5-year IRR (conservative)	~30%	—	Below 55% benchmark
5-year multiple on equity	~3.7x	—	Below 5.3x benchmark

Sensitivity

Scenario	Year 1 EBITDA	Payback	Survivable?
Base case (GBP 250k GRF, cloud)	GBP 68,000	2.8 years	Yes
20% client attrition	GBP 37,000	4.2 years	Tight — breakeven after debt service
Legacy software (12-month automation delay)	GBP 68,000 (unchanged Y1, delayed Y2-3 uplift)	3.8 years	Yes
GRF = GBP 200k (at GBP 275k ask)	GBP 27,000	>5 years	No — renegotiate to GBP 200k or walk
Combined stress (20% attrition + legacy + GBP 200k GRF)	~GBP 5,000	Never	Deal-breaker at any price above GBP 200k

Scenario A: Cloud Software (Xero/QBO) — 25% probability

Month	Actions	Savings
1	Enable bank feeds + auto-reconciliation; deploy Dext for document OCR; build client document chase bot (Claude Code + Gmail API)	~GBP 1,400/mo
2-3	Build LLM transaction categorization pipeline; build VAT return pipeline (Xero -> MTD); build management reporting pipeline	+GBP 1,300/mo
4-6	Build year-end accounts drafting assistant; build CT600 pre-population; migrate off Dext to custom OCR pipeline; calibrate categorization accuracy	+GBP 800/mo
7-12	Accept 20-30 new clients from existing waitlist; build client portal; build SA100 pipeline for individuals; manage FTE through natural attrition	+GBP 2,500/mo (new revenue)

Scenario B: Legacy Desktop (Sage 50/IRIS) — 75% probability

Month	Actions	Savings
1-3	Audit client list; begin migrating top 20% clients to Xero (60% of revenue); no automation wins yet	GBP 0
4-6	Continue migration; deploy Scenario A Month 1-2 stack for migrated clients only	~GBP 800/mo
7-9	80%+ clients on Xero; full automation stack deployed	~GBP 2,700/mo
10-12	Scale: begin accepting new clients; optimization pass on all pipelines	+GBP 2,500/mo

AI Stack Cost (Steady State)

Component	Monthly Cost	Build/Buy
Dext (first 6 months only)	GBP 180	Buy (then migrate to custom)
Claude API (categorization, drafting, chase)	GBP 150	Build
Xero subscription	GBP 80	Buy
Custom OCR pipeline	GBP 30	Build
Total (steady state)	GBP 460/mo	70% build

Net annual savings: GBP 43,000-48,000 (1 FTE equivalent through natural attrition + AI tooling cost)

Recommended: Earn-out with retention-linked deferred consideration

•60% at completion (GBP 150k) — funded from buyer equity
•40% deferred over 12-24 months (GBP 100k) — paid quarterly against verified client retention rates
•Clawback: if GRF falls >15% in Year 1, deferred payments reduce proportionally
•Price adjustment mechanism: completion price tied to confirmed GRF from management accounts (not broker's bracket)
•Seller financing: 5-year term at 6-7% on the deferred portion if lump-sum payment isn't structured as earn-out

Key Terms to Negotiate

Price at 1.0x verified GRF (target GBP 250k, not GBP 275k asking)
12-month seller transition consultancy (2 days/week months 1-3, 1 day/week months 4-12)
Deliverable-based transition milestones: client relationship notes, joint meetings for top clients, written introductions
Non-compete: 3 years, 25-mile radius, professional services
If asset purchase: 10% holdback in escrow during 4-6 week HMRC agent code re-authorisation window
Completion timing: avoid Dec-Feb (SA filing peak) — target April/May or August

Walk-Away Prices

Confirmed GRF	Max Bid	Multiple	Rationale
GBP 250,000	GBP 262,000	1.05x	Below Plymouth comp (1.1x), reflecting unverified financials
GBP 225,000	GBP 225,000	1.0x	At framing margin, no premium
GBP 200,000	GBP 200,000	1.0x	Broker credibility impaired, pay sector floor

Risk	L (1-5)	I (1-5)	Severity	Class	Mitigation	Residual
Qualified staff: no ACCA/ICAEW holder other than principal	2	5	10	HIGH	Confirm in info pack; if none, engage contractor reviewer + develop internal PC path	6 (Med)
Key-person dependency on departing principal	4	4	16	HIGH	12-month seller transition with deliverable milestones; earn-out retention clawback	8 (Med)
GRF ambiguity — true GRF may be GBP 200k	3	4	12	HIGH	Price-adjustment clause tied to confirmed GRF from management accounts	4 (Low)
Software stack is legacy (Sage/IRIS)	3	3	9	MEDIUM	Budget GBP 15k migration cost; extend automation timeline to 15-18 months	6 (Med)
Client concentration (unknown)	3	4	12	HIGH	Demand top-10 revenue breakdown; re-price or walk if top client >15%	6 (Med)
Staff departure post-completion	2	4	8	MEDIUM	Retention bonuses (12-month stay); early transparent engagement; pre-completion visit	4 (Low)
HMRC agent code re-authorisation gap (asset purchase)	4	3	12	HIGH	Time completion outside SA season; 10% escrow holdback; seller covers filings during gap	6 (Med)
Remote operation from Singapore	3	3	9	MEDIUM	Promote internal PM; seller as acting GM via earn-out; 2-3 UK visits in year 1	4 (Low)
Revenue trend declining (unknown)	2	4	8	MEDIUM	Require 3-year management accounts in DD; walk if >5%/yr decline	4 (Low)
Meta day job time conflict (Year 1)	3	3	9	MEDIUM	Plan 3-month leave of absence for transition; delegate to PM by month 4	4 (Low)
AML supervision transition	3	3	9	MEDIUM	Identify supervisory body pre-completion; designate RI from existing qualified staff	3 (Low)
Dorset demographic risk (ageing client base)	3	2	6	LOW	Diversified client base; budget 3-5% organic annual attrition	4 (Low)

#1 Deal-killer risk: No qualified professional on staff other than the principal. For a Singapore-based buyer with no accounting credentials, this is an operational viability question, not merely a key-person risk.

Deal	GRF	Price	Multiple	Status	Notes
Plymouth, South West	GBP 200k	GBP 220k	1.1x	Sold	281 clients, 3-5 staff — closest comparable
Dorset practice B	GBP 350k	GBP 420k	1.2x	Under Offer	Confirms buyer demand at 1.1-1.2x in Dorset
Dorset practice A	GBP 300k	GBP 360k	1.2x	Active	Larger practice, premium pricing
Dorset practice C	GBP 400k	GBP 480k	1.2x	Active	Institutional-size practice
This target (RA 31945)	~GBP 250k	GBP 275k	1.1x	Active	GRF unverified (bracket)

Market clearing at 1.1-1.2x GRF in Dorset. This target is at the low end of the range — fair value if GRF is confirmed.

What personas agreed on

•Unanimous Investigate — observable signals are strong enough to justify an information pack call, but the unknowns are too material to bid at GBP 275k
•"Turning away clients" is the strongest quality signal in the current pipeline — AI automation converts a supply constraint into revenue growth
•Staff tenure (10+ years across the board) is exceptional and provides operational continuity for a remote buyer
•Earn-out enforcement is about incentive design, not contracts — retention-linked deferred payments with deliverable milestones, not presence clauses
•Practising certificate is a DD item, not a deal-breaker (~15% probability of worst case)
•Don't bid above 1.0-1.1x verified GRF — the bracket framing (GBP 200-300k) means the denominator is unconfirmed

What personas disagreed on

•Risk Manager scored Q=5, I=4 vs consensus Q=6, I=5 — Risk penalizes unknowns as risk; others score observable base case and treat unknowns as DD items. Risk concedes conditional re-rate to Q=6, I=5-6 post-info-pack. Resolution: methodological difference, not factual disagreement.
•Revenue growth rate: Engineer initially modeled 12% (30 new clients); Analyst modeled 7%. Converged at 8-10% cumulative over Years 1-3 (flat in Year 1 due to ownership change friction, 6-7% in Years 2-3 as automation unlocks capacity).
•Integration score spread (I=4 to I=6 in Round 1): Driven by different probability weightings on legacy software (Risk: 60%+, Ops: 75%, Analyst: more optimistic). Converged at I=5 (4/5 personas) with clear conditional upgrade path.
•Max bid at GBP 200k GRF: Analyst initially at GBP 195-205k, Veteran at GBP 220k. Converged at GBP 200k (1.0x flat) — misleading GRF framing forfeits the multiple premium.

Classification: Investigate — specific concerns to resolve before proceeding.

Immediate next action: Call Abi Barker (01765 698 699, ref 31945) to request the information pack. The call should establish four gate questions within the first 10 minutes:

What accounting software does the practice use?
Do any staff members other than the principal hold ACCA/ICAEW practising certificates?
Can you confirm the GRF from the most recent management accounts (not the bracket)?
What is the largest single client as a percentage of total fees?

If all four resolve positively (cloud software, qualified senior on staff, GRF >= GBP 230k, no concentration >15%): upgrade to Promising, negotiate to 1.0x verified GRF, proceed to heads of terms.

If any resolve negatively: reassess. Legacy software alone is survivable (extends payback by 12 months). No qualified staff alone is solvable (contractor bridge + internal PC development). GRF at GBP 200k requires price renegotiation to GBP 200k. But multiple negatives compounding → Pass.

Pipeline context: A3 ranks 3rd-4th in the active pipeline behind O3 (payroll bureau — more underwritable today) and M1 (MSP — higher returns). Run parallel diligence tracks on O3 and A3 — the buyer's limiting resource is time, not capital. Do not abandon A3 for O3 without making the information pack call first; it takes 30 minutes and could upgrade this to the strongest deal in the pipeline.

Meta day job: Plan a 3-month leave of absence for the completion and transition period. Do not permanently leave Meta for this deal alone — the trigger for full-time operation should be aggregate portfolio GRF exceeding GBP 600-800k.

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Dorset Accountancy Practice (RA 31945)

Deal Structure (Recommended)

P&L Comparison

Returns Summary

Sensitivity

Scenario A: Cloud Software (Xero/QBO) — 25% probability

Scenario B: Legacy Desktop (Sage 50/IRIS) — 75% probability

AI Stack Cost (Steady State)

Recommended: Earn-out with retention-linked deferred consideration

Key Terms to Negotiate

Walk-Away Prices

Gate Questions (resolve before LOI)

Financial DD

Legal DD

Employment DD

Commercial DD

IT/Systems DD

What personas agreed on

What personas disagreed on