When the selling partner leaves, some clients may follow the practice, some may reconsider, and some may discover that nobody remaining understands their history. The buyer should not treat goodwill as transferred merely because the client list, files and recurring fees are included in the sale.

Assess relationship dependence client by client. Identify who holds the trust, knowledge and decision-making role today; test whether another person already participates; then use the handover period to produce evidence that the relationship can operate without the seller. Price protections may share attrition risk, but they do not create transferable relationships.

Separate firm goodwill from personal goodwill

Australian Government guidance recognises that business goodwill can include customer loyalty and relations, customer lists, staff performance, reputation and operating procedures (business.gov.au). Those elements do not always travel together.

An accounting client may value the firm’s responsiveness, systems and broad capability. Another may call only the selling partner, rely on that person’s judgement and introduce referrals because of a long personal history. Both appear in the same fee ledger, but the second relationship has a different transfer risk.

Dependence can sit in several places:

  • access: the seller is the only person the client contacts or trusts to respond;
  • context: commercial history, preferences and unresolved issues remain in the seller’s memory;
  • judgement: unusual tax, accounting or business questions are escalated only to the seller;
  • authority: the seller alone approves scope, price changes, write-offs or difficult conversations;
  • network: referrals come through the seller’s personal reputation or external relationships; and
  • delivery: the team performs routine work, but the seller reviews, corrects or completes the hard parts.

The question is not whether the seller is popular. It is whether the practice can preserve service quality, confidence and commercial value after that person is no longer available.

Build a relationship-dependence map

Request an anonymised client schedule before seeking identifiable records. The OAIC’s business-sale guidance recommends considering de-identified information and limiting access to personal information during due diligence (OAIC). Let the parties’ lawyers set the disclosure, consent and data-room protocol.

For each material client group, record:

  • annual and year-to-date fees by service line, client tenure and recent fee movement;
  • the relationship owner, engagement lead, preparer, reviewer and backup contact;
  • who attended the last several meetings and who initiated significant calls or emails;
  • partner hours, review notes, write-offs and unbilled involvement;
  • upcoming deliverables, known issues, preferences and key external advisers;
  • the source of the relationship and any referrals made or received;
  • current engagement terms, authorities and record completeness; and
  • any client comments, complaints, service failures or expressed concern about the sale.

Reconcile the schedule to billing and workflow systems. A seller’s estimate that “the manager knows everyone” is not the same as contact history showing that the manager leads meetings, explains advice and resolves issues.

Map fee exposure as well as client numbers. A practice may have broad staff contact across most clients but remain highly exposed if its largest or most influential groups depend on one partner. Also group related entities consistently: a family group spread across several ledgers may still represent one decision-maker and one relationship.

Test four dimensions of transferability

Use a simple rating—shared, transferable with work, seller-dependent or unknown—across four dimensions.

Relationship access

Does the client communicate with multiple people? Has the proposed successor led a meeting, delivered advice and handled a difficult matter? A copied email is weak evidence; accepted responsibility is stronger.

Knowledge and records

Can another practitioner understand the group structure, prior positions, deadlines, preferences and unresolved matters from the file? The TPB says that when a tax or BAS practice or client list changes ownership, relevant contemporaneous proof-of-identity records are expected to transfer with other client records. It also stresses that client information cannot be disclosed to the buyer without client consent or a legal duty (TPB). A well-known client with a thin file is not low risk.

Technical and supervisory capacity

Who will make the judgements and review the work after completion, and what else must move from that person’s workload? APES 325 requires firms to establish, maintain, monitor and document a risk-management framework; APESB explains that an effective framework should support business continuity and quality, ethical client service (APESB). The buyer should test actual capacity, not merely nominate a successor on an organisation chart.

Engagement continuity

Confirm which entity is engaged, the defined scope, responsibilities, fee basis, key authorities and communication path after completion. APES 305 requires members in public practice to document and communicate engagement terms and sets out matters such as scope, responsibilities, other practitioners’ involvement, fees and document ownership (APESB). The buyer’s lawyer and professional advisers should determine when new or amended engagements and client permissions are required.

Turn the handover into an evidence period

A promise that the seller will be “available for three months” is not a transition plan. Set client cohorts, named successors, actions, dates and proof of completion. A useful sequence is:

  1. Prepare: complete file summaries, open-item lists, relationship histories and the forward work calendar.
  2. Introduce: explain the proposed change through an agreed, adviser-approved communication process.
  3. Work together: have the successor lead meetings and deliverables while the seller observes and fills genuine gaps.
  4. Reverse the dependency: clients contact the successor first; the seller becomes the escalation point rather than the default channel.
  5. Test absence: run an agreed period in which routine and selected complex matters proceed without seller intervention.
  6. Record the result: log client acceptance, concerns, lost work, extra hours, incomplete records and capacity constraints.

Hypothetical example: a practice’s 20 largest client groups generate 38% of annual fees. Twelve already deal routinely with managers, five have met a proposed successor only once, and three communicate solely with the selling partner. Treating all 20 as one retention assumption hides the evidence. The buyer could model separate downside cases, prioritise the eight weaker relationships for pre-completion transition and investigate whether the successor has time and technical capability to absorb them.

Reflect unresolved dependence in the transaction

Where evidence remains weak, possible responses include a longer or more intensive handover, staged client introductions, deferred or retention-linked consideration, clear cooperation obligations, and legally appropriate restraints or non-solicitation provisions. The sale agreement should define the clients, measurement period, fee basis, exclusions, information rights and dispute process if price depends on retention.

These mechanisms require acquisition, legal, tax, accounting and valuation advice. They allocate consequences; they do not guarantee that clients will stay, that staff can absorb the work or that tacit knowledge will be recovered after the seller leaves. A buyer may need to revise normalised earnings for replacement partner capacity, duplicate coverage during transition and additional client-service time.

Frequently asked questions

Is a long client tenure proof that the relationship will transfer?

No. Tenure shows history, not who owns the relationship. Review recent contact, decision-making, delivery and successor involvement. A long-standing client who has never dealt with another senior person may be more dependent, not less.

Should the seller introduce every client before completion?

Prioritise material, complex and seller-dependent relationships, but follow an adviser-approved communication and consent process. The appropriate timing depends on confidentiality, transaction certainty, engagement structure and the risk of disruption.

Can a retention adjustment solve seller-dependence risk?

It can share part of the financial consequence if drafted well. It cannot replace adequate files, staff capacity, client consent, a credible successor or a working transition plan.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.