Why East Coast Buyers Should Be Looking West

When an east coast firm tells me it is looking to acquire, Western Australia is almost never on the list. The reason given is always the same one, and it is always the time zone. Two or three hours is treated as a structural obstacle to running a practice you cannot easily drop in on. I understand the instinct. I think the reasoning has now reversed, and the firms that work that out first will have a market largely to themselves.

For Australian accounting practices considering acquisition, the national market is not one market. It is several, and they are not performing the same way at the same time.

The historical objection to buying west was practical. A two or three hour gap makes oversight harder, makes travel a full day in each direction, and makes the acquired office feel remote in a way a Brisbane or Adelaide acquisition does not.

But look at where the work is actually going now. A great many Australian practices resource part of their compliance function offshore, and the centres they use sit across Asia. Manila and Kuala Lumpur keep the same clock as Perth. India, where a large share of Australian offshore accounting work is performed, runs two and a half hours behind Perth — but four and a half to five and a half hours behind Sydney and Melbourne, depending on daylight saving.

The advantage varies by location, and in some markets it is substantial. A Perth practice has materially more of its working day in common with the people doing the work. Queries are resolved while both sides are still at their desks. Files move without an overnight lag. The east coast equivalent operates on a much narrower window of overlap, and that window sits at the edges of the day rather than through the middle of it.

That is not a marginal difference. For a firm that has already invested in an offshore model, a west coast acquisition is the operationally simpler one.

Our benchmarking has historically shown Western Australian accounting practices running at higher profitability than their east coast counterparts — above 40 per cent, against something closer to 33 or 34 per cent on the east coast.

Part of the explanation is isolation, which cuts both ways. A relatively closed market means less fee competition and less pressure on rates. It also means a smaller pool of staff, a smaller pool of clients and fewer exit options — so the same characteristic that supports the margin also constrains the growth.

Then the mining boom arrived and the advantage largely disappeared. Staffing costs in Perth became extraordinary as the resources sector bid for the same people, and accounting practice profitability there converged with the east coast. That period ran for years and it is what most east coast principals still have in their heads when they think about the Perth market.

It is out of date. Profitability in the west is building back toward 40 per cent. The reason is not that staff have become cheaper — recruiting good people in Perth remains genuinely difficult. It is that more Perth firms have adopted offshore resourcing and are getting relief from that direction instead. Which brings the argument back to where it started.

There is a straightforward commercial consequence to a market that interstate buyers have written off. Fewer bidders.

A well-performing Sydney or Melbourne practice coming to market will attract interest from consolidators, from national firms, from private capital and from local competitors. A comparable Perth practice attracts a materially shorter list, and much of it is local. Our current listings and recent sales give a reasonable picture of what does and does not reach the open market.

I expect real opportunities to come out of Western Australia over the next few years. The demographics there are the same as everywhere else — principals reaching retirement without an internal successor — but the buyer pool has not deepened at the same rate. That is an imbalance, and imbalances are where acquisitions get done on sensible terms.

A higher margin is only worth paying for if you can work out where it comes from. There is a meaningful difference between a practice that is well run and a practice that is sitting in a favourable market, and you are buying the first, not the second. This is the work an independent appraisal exists to do, and it is the step most buyers compress when a deal starts moving.

The distinction matters at the valuation stage. If the margin is market-derived and the market normalises — as it did through the boom — you have paid for something that was never the vendor's to sell.

None of this is an argument that a west coast practice is automatically a better buy. It is an argument that the reason most firms have used to exclude the west no longer holds, and that a market fewer people are looking at is usually a market worth looking at.