How much is my agency worth? Is an offer that I have received out of the blue worth considering? Values differ widely, there are guidelines but no standard rules. The old adage – it is worth what a willing buyer will pay – always applies. What steps should be taken before searching for a buyer?

Smaller letting agencies with one or two branches, managing between 200 to 400 properties, personally owned by one or two principals, will often fetch a price similar to one year’s fee income. This sum may not be sufficient to fund retirement, since such firms are lifestyle businesses that often provide a range of goodies as well as valuable salaries and pension contributions; personal freedom, cars of choice, mobile and home phones and broadband are usually tax deductible. Staff refreshments often extend to decent sandwiches, an occasional lunch and chocolate biscuits from the private tin.

Larger concerns may well be valued on a Price/Earnings ratio between 3 or 4 times pre-tax profits, subject to adjustment by adding back the drawings of principals to the extent that they exceed the cost of salaried replacements.

No decision to sell, unless unavoidable due to health problems or terminal dissension between lifetime or business partners, should be taken until the most careful thought has been given to the investment of the proceeds of sale net of tax, the costs of sale and the cost of re-investment. Values vary dramatically between sales agencies – transactional businesses – and letting agencies with recurring income. Young estate agencies may be worth no more than the value of the sales pipeline and will be paid for as sales complete. Larger, well established firms with a strong local following, good connections with developers and a number of branches that provide regional coverage will do better but the partners’ ability to sell will often depend on new partners willing to buy in.



There are no sizeable business transfer agents specialising in the sale/purchase of residential agencies, although there are several concerns that advertise a wide variety of businesses for sale in the nationa press and feature prominently in The Times and Daily Telegraph each Thursday and Sunday. Telephone enquiries made during research for this article did not reveal any particular level of expertise in valuing businesses for sale, but rather an anxiety to obtain an additional listing.

Other publications such as Daltons Weekly and Exchange and Mart offer smaller concerns for sale, but will not appeal to the serious vendor or purchaser of a residential business.

A commonsense analysis is a better approach. Countrywide, nationally, and Leaders in the Home Counties are well known for their acquisition policies. In almost every region there will be a willing purchaser seeking to extend market coverage who can be identified because the majority of deals are noted in PROPERTYdrum. Franchise companies such as Winkworth encourage franchisees to expand by acquisition and will on occasion purchase directly for onward sale to a new franchisee.

The appeal of a business and its value can be driven upwards by dressing the business for sale without publicity or making staff aware. A thorough spring clean always pays dividends. The need for a physical spring clean is too obvious for discussion. A lick of paint, inside and out, sharpening the window and internal displays, getting rid of clutter such as redundant material, unused or damaged furniture and replacing worn floor coverings will lift staff morale and improve day to day business. The new clean look and higher standards must be maintained because business sales often take several months to complete once a buyer has been found.

Extend the fresh look to the website, press advertising and day-to-day literature. A rebranding exercise will not be appropriate but giving new attention to detail pays off in attracting a suitor. Review the quality of the performance of each member of staff and think hard about incentive schemes that will increase profitable fee income. Businesses on a downward trend will receive a down- market price, while those showing growth are always more attractive propositions.

The review should extend to checking standard letters, documents and agreements with vendors, landlords and tenants. The cost of a formal review by a solicitor who specialises in the residential market is an annual necessity as legislation and regulation change with alarming frequency. Individual transaction files should also be checked to ensure they are complete and in order.

Last but not least, look at the annual accounts for the last three years to note any trends – good or bad – that may need explanation such as bad debts, big changes in any one source of income or expense category. Only too often Statutory Accounts are produced late, just in time to meet the demands of Companies House. This is bad practice. If giant companies like Shell, Tesco and Waitrose can report within twelve weeks of the end of an accounting period, how much easier it should be for smaller companies to do so. Accountants and auditors are often to blame and make dealing with queries difficult because of delays. A full set of accounts should be available, subject to tax computation, within 12 weeks of the end of the financial year.

The quality of internal management accounts must also be scrutinised. Any well run accounts department, even if it is only one person with occasional help, ought to produce a monthly P&L and balance sheet by the middle of the succeeding month. The quality of annual and management accounts reduces the purchaser’s need for exhaustive due diligence, its costs and delays. Advisers Sales are often delayed or destroyed by incompetent advisers. Seek out solicitors and accountants with strong commercial practices. The friendly guy who dealt with your annual accounts for many years and the lawyer who is good at landlord and tenant law will almost certainly lack experience in business sales, transfers or the introduction of new investing partners.


Obtain a draft of a confidentiality letter before making any contact with business agencies or potential buyers and consider using your commercial solicitor to deal with the first contacts.

Both vendors and purchasers have legal responsibilities to employees of a business that is to be sold. The “Transfer of Undertakings (Protection of Employment) Regulations 2006” (TUPE) protects an employee’s terms and conditions when a business or undertaking or part of one is transferred to a new employer.

Employees have a right to be informed about a prospective transfer before it is complete. The thrust of the Regulations is to ensure that employees are treated as if they worked for the new employer from the beginning of their employment.

Inevitably there may be redundancies or changes in roles and responsibilities. The issues should be handled with sensitivity and care to preserve the goodwill of employees and any risk of claims for constructive dismissal. Similarly, vendors ill wish to avoid any sudden departures that may damage the firm and endanger a transaction.

While the regulations are set out clearly with notes for the benefit of both sides, the advice of a seasoned commercial lawyer should be regarded as essential.

Successful vendors spend personal time and effort on planning the sale, before the first contact and then through all the stages until an offer is made. Any offer should be set out in detail in the form of Heads of Terms that can be discussed and negotiated before contracts are drafted. Discussions between purchaser and vendor with their advisers frequently speeds the process, reduces cost and maintains goodwill between the parties.

Cash is king, accepting loan notes, shares in private companies or any form of deferred payment which is not supported by money placed in escrow is madness. The collapse of one aggressive public company that had made acquisitions of letting agencies paid for in Loan Notes (which were then worthless) left some vendors wishing they had been less trusting and more demanding. It is still remembered with pain and distress.

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