Finance to buy a block of fees: a practical guide for accountants

Buying a block of fees means acquiring a defined group of client relationships, and the recurring fee income that comes with them, from another accountancy practice. It is one of the quickest ways to grow a practice, but the value of the purchase depends almost entirely on how many of those clients stay after the handover.

This guide is for accountants and bookkeepers growing by acquisition. It explains how fee block purchases are typically structured, works through a clawback example, and shows how lenders look at the deal. Smart Funding Solutions is a broker: we can test what lenders on our panel are likely to support before you make an offer. If you are buying a whole firm rather than a client list, read our guide to loans to buy an accountancy practice.

01What a block of fees is

A block of fees is a portfolio of clients sold separately from the rest of a practice. Sellers are often retiring partners, sole practitioners scaling back, or firms refocusing on a particular service line. The buyer takes on the clients, the engagement letters and, ideally, a managed handover.

Unlike buying a whole firm, you are not usually taking on premises, staff or the seller's company. That makes the deal simpler, but it also means the value sits almost entirely in whether clients stay with you.

02How fee block purchases are usually funded

Most purchases combine more than one source of money. The right mix depends on the price, your cash reserves and how the seller wants to be paid.

Source	How it is typically used
Business loan	The main external funding, sized around what the combined fee income can comfortably repay
Buyer contribution	Your own cash, which shows commitment and reduces the amount you need to borrow
Deferred consideration	Part of the price paid to the seller over time, often linked to how many clients are retained

Specialist accountancy practice loans are designed around recurring fee income rather than bricks and mortar, which suits a business with few hard assets. Depending on the size of the deal, structured acquisition finance or unsecured business loans may also be options.

It pays to line up funding before you agree terms with the seller. Knowing what a lender is likely to support tells you what you can realistically offer.

03Deferred consideration and clawbacks

Deferred consideration means you pay part of the price on completion and the rest later, commonly spread across the first year or two. It eases pressure on your cash flow and lets fees collected after completion help pay for the purchase.

Most deferred arrangements include a clawback or adjustment mechanism. If clients leave soon after the handover, the balance you owe the seller falls. A well-drafted structure should set out:

• how the deferred amount is calculated, and when it is paid
• which clients count as retained, and over what period
• what happens if fees are lower than expected
• the seller's role in introducing you to clients

Lenders like deferred structures because they share the risk of client losses between buyer and seller.

A worked clawback example

Illustrative example only — not a quote or offer of finance.

Say a block has gross recurring fees of £200,000 and the agreed price is £200,000, with half paid on completion and half deferred for 12 months, adjusted for retention.

1. On completion you pay £100,000, funded by your own cash and a loan.
2. After 12 months, clients who have stayed are billing £170,000 a year, so 85% of the fees have been retained.
3. If the agreement adjusts the whole price for retention, the final price becomes 85% of £200,000, which is £170,000.
4. You have already paid £100,000, so the deferred payment falls from £100,000 to £70,000.

Whether the adjustment applies to the whole price or only the deferred part, and whether gains are shared if fees grow, depends on the agreement. Model a low-retention case before you borrow, so the loan is still affordable if more clients leave than expected.

04How lenders assess a block of fees

Lenders usually start with the gross recurring fees (GRF), but valuation is only part of the picture. They will typically look at:

• Quality of the fee income: how recurring it is, the service mix and how long clients have been with the seller
• Client concentration: whether a few large clients account for much of the income
• Affordability: whether the combined practice can meet repayments with a sensible margin
• Your experience: your track record, qualifications and capacity to service the new clients
• Deal structure: the split between upfront and deferred payments, and any clawback
• Your own position: cash reserves, existing borrowing and credit history

Documents a lender will typically ask for on a fee block purchase include:

• a schedule of the block's gross recurring fees, client by client, with the service each client takes
• the heads of terms, showing price, the upfront and deferred split and any clawback
• your own practice's recent filed accounts and up-to-date management accounts
• a cash-flow forecast for the combined practice, including a lower-retention scenario
• details of your existing borrowing and a summary of your experience and team capacity

Two lenders can view the same fee block differently. One may be comfortable lending against recurring compliance fees, while another may discount advisory or one-off work, cap the loan at a lower share of the price or insist on a longer deferred period. Appetite for the profession, deal size and credit policy all play a part.

Because most practices hold little hard collateral, lenders focus on cash flow and may ask for a personal guarantee. Our guide to how lenders assess business loan applications covers the wider process.

£137,500A transaction we arranged£137.5K to fund an accountancy practice acquisition.An established firm had an acquisition agreed. We structured the funding around the transaction and got it completed.

05The buying process step by step

1. Agree heads of terms with the seller, covering price, payment structure and handover.
2. Test funding early so you know what lenders are likely to support.
3. Carry out due diligence: client lists and fee history, payment records, working papers, systems, and the reason for the sale.
4. Finalise the price and structure, including upfront and deferred payments and any clawback.
5. Complete legal documents and the loan: the lender issues a formal offer with conditions (often including sight of the signed sale agreement and any personal guarantee), then funds are drawn down on completion.
6. Manage the handover: client introductions, new engagement letters and anti-money laundering checks on the transferring clients.

06Risks to weigh before you borrow

• Client attrition: some clients will not transfer, which reduces the income repaying the loan.
• Overpaying: a price based on headline fees can overlook low-margin or high-maintenance clients.
• Capacity and hidden costs: extra staff, software licences, office space and professional indemnity insurance all add to costs.
• Cash flow strain: repayments start straight away, while new fees can take time to bill and collect.
• Documentation gaps: poor records make it harder to value the block and to service clients properly.

Take legal and tax advice on the sale agreement before you sign, particularly on payment dates, clawback terms and what the price includes.

07Making the finance work after completion

Match repayments to your cash flow, keep a reserve for months when fees are slow to come in, and budget for the extra running costs. Track client retention against the figures you relied on, so any deferred payment adjustments are based on accurate numbers.

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