Much has been written about the technical process of acquiring or exiting, but very little about the experience of going through a PE-backed acquisition.
In 2022, Horizon Capital-backed Dains Accountants acquired Isosceles Finance. So, we decided to ask the target, acquirer, and investor to share their unique perspectives and learnings on going through this acquisition process with the iFD Community.
Related Article | Isosceles acquired: The dawn of a new business services model
Contributing to this event were:
Mike O’Connell, Founder and CEO of Isosceles Finance
Richard McNeilly, CEO at Dains Accountants
Emily Hickley, Investment Director at Horizon Capital
(Reading time: 8:00 minutes)
Let’s start with the pre-acquisition process to set the scene: Where did the idea to invest in the accounting space come from?
PE firm Horizon Capital regularly conducts market mapping exercises into sectors that look interesting to establish the extent of a potential investment opportunity. This means that when they come to the table, they understand the market, have a tested thesis, some ideas and a pipeline of potential investment opportunities.
Horizon’s SME accountancy market map identified this sector as an attractive investment opportunity for the following reasons:
- It has strong underlying market dynamics – a large and stable market that has seen consistent year-on-year growth, which is forecasted to continue.
- Client relationships tend to be long and sticky – the provision of business-critical, non-discretionary services and outsourced services delivered in a trusted advisor relationship means there is always something new to offer the client.
- A constantly changing regulatory landscape and ‘the Big 4 audit conflict’ have created a plentiful supply of work flowing into the SME accountancy market.
- The opportunity to buy and build, and add value is high – it’s a highly fragmented market, with 90,000 registered accountants in the UK and 40,000 related businesses.
What drew Horizon to Dains Accountants as the platform investment company?
Dains stood out as the platform investment company for several reasons:
- A long-established business (it will celebrate its 100th year in 2026) entrenched within its community, with a strong customer base and an excellent reputation.
- A talented and ambitious team lead it.
- The business was growing ahead of the market in terms of revenue and how the business was managed.
- The leadership team were actively driving growth; they understood how to do this through acquisitions to expand geographic reach and capability.
Why did Dains decide to partner with Horizon?
Two years before Dains partnered with Horizon, the leadership team agreed on a strategy to scale the business. Dains was already the provider of choice in the Midlands, and they felt there was an opportunity to scale and lead the UK’s SME accountancy and advisory space.
Dains also did market mapping. They looked firstly at the regional operators they could partner with to grow their reach, then at complementary businesses to expand their capability.
Dains shook hands on a deal with Horizon because they had people to help them on the journey. Rather than just being about the money, the decision was more about Horizon’s expertise, approach, cultural fit, and knowledge that would help them accelerate once they had chosen to take the investment.
What was the transition from a partnership practice to a PE-backed business like for Dains?
Making this transition is one of the most energising and invigorating things that Richard McNeilly, CEO, has done. He felt that as a partnership, they were fast-paced and on a trajectory significantly ahead of the market. But with PE backing, the pace of change is considerably faster; the team is now permanently working on high-value activities and is very accountable.
Scale will enable Dains staff to spend more time delivering the type of work they are interested in. Without scale, most accountancy practices struggle; senior people do work they are over-qualified to do, and junior people are too overstretched to develop, because there aren’t enough people to support them.
Now we understand the pre-acquisition process, let’s get to the heart of the topic: What was behind Isosceles’ decision to sell the business? Why now?
Over the last three years, Isosceles has seen 15-20% year-on-year growth, but Mike O’Connell, Founder and CEO at Isosceles, knew this wasn’t enough to build a sizeable business, retain the talent in the business or keep their clients satisfied.
Half of Isosceles’ staff are on a training contract. Every year for the last seven years, they’ve brought in around eight to ten graduates and trained them in the way the business needs. Mike felt Isosceles’s organic growth trajectory wasn’t enough to give that pool of young, ambitious, talented finance and HR professionals coming through the development they needed to enhance their careers, and he feared they would go elsewhere.
On top of that, clients were increasingly looking for a one-stop shop for all their finance and accounting needs. Isosceles found themselves either turning work down or introducing partners, but the lack of consistency in the quality of support from partners meant clients weren’t supported as Isosceles wanted.
Mike’s own analysis of the market revealed that Isosceles needed to grow exponentially. He considered going through his own PE journey, but the business was still too small to be the investment platform company, so he decided to join someone else on their journey.
Accountancy Age article | Dains and Isosceles: A new type of partnership
Why did Isosceles choose the Horizon-Dains platform?
The first approach came from Horizon. The conversation focussed on the thesis and market analysis. At the time, Mike thought he was just sharing notes, as Isosceles wasn’t for sale, but much of what Horizon was saying resonated, and he found himself open to a conversation with Richard McNeilly.
Richard had a compelling and persuasive vision that Mike felt he could deliver; they shared similar views about people development and clients, and they had a passion for delivering excellent service. Their services and geography touched, but nothing overlapped. A compelling vision, backed by excellent PE and know-how, was a powerful combination.
Horizon and Dains understood that Isosceles was different, and companies were crying out for a one-stop shop with commercial solutions, not just technical accounting solutions.
The final deciding factor was the stage the platform was at. Isosceles were early in the conversation. Mike felt the relative size of the businesses meant that Isosceles would be influential, and there would be great opportunities for the Isosceles professionals coming through. He also felt that everything Isosceles stood for would be enhanced, not swamped.
Why did Dains choose Isosceles?
Isosceles are a complementary innovator with a well-defined proposition, able to deliver differentiation and enhance the Dains service lines. They have:
- A strong, high-quality business with stellar financials.
- A highly capable leadership team runs it.
- They are based in geographic locations that will help Dains scale nationally.
- They are selective about client acquisition; they don’t chase every pound in the market and share Dains’ ethos of delivering a high-quality service.
Isosceles are culturally a good fit with Dains. The acquisition enabled Dains to access exceptional talent, which is essential for a people-centric business.
So, to answer this event’s headline question: What did it feel like for Isosceles to go through a PE-backed acquisition process?
Having been through dozens of transactions with clients and ‘been in the trenches’ with those clients, Mike reflected that advising ourselves felt a little strange. Even though Isosceles hadn’t been through a ‘for sale’ process and was not specifically prepared for a sale, the company is run; indeed, every client is run, as if a process could happen tomorrow. So, Mike was confident that everything was in great shape and didn’t need any particular preparation other than placing documents in the data room.
However, nothing prepared Mike for the emotional side. Inside, it was a bit of a rollercoaster! He is a big believer in confidentiality; until the deal is done, it isn’t done. It can damage the team, morale and competition if these things are not properly communicated at the right time. So he was unprepared for, and uncomfortable about, not being able to share what was going on with other team members and not being entirely honest with explaining why he needed particular documents and information.
Mike has no regrets. Isosceles hasn’t lost a single client or employee due to the transaction, and the business continues on an impressive growth trajectory.
This article tells the story and distils the learnings: What were the first few days like for Isosceles after the transaction?
Mike knew from client transactions that how they approached the first month following the acquisition was critical to its success.
The first step was communicating what had happened and what would happen going forward, what this meant to each client and each employee, and the logic behind the relationship. He gave employees and clients complete freedom to ask whatever they wanted to know.
Mike was keen to emphasise to the iFD Community: do not go looking for an acquirer, do not go into a transaction and agree to Head of Teams unless you believe in it. Unless the logic makes complete sense and you are completely bought in, clients and employees will see straight through, and it will fail.
The next step was to introduce Richard McNeilly to the team, which gave reassurance that Mike and Richard were saying the same things, had the same values and were committed to the relationship and, above all, that the future looked positive.
People do business with people, so the final step, immediately following the transaction, was to get to know each other and the service lines and build trust.
In hindsight, is there anything that Isosceles would have done differently?
Early on, as an organisation, Isosceles and Dains started a process of getting to know each other’s service lines and revealing the wider portfolio to their respective clients. But it takes a while to build trust. All service providers protect their clients as their first priority and will not introduce anyone they don’t trust. So this process took a little longer than, in hindsight, Mike would have liked; it is noticeable that as the companies got to know each other more, the introductions and cross-selling rates accelerated.
Mike is not altogether sure he could have done this introduction phase any faster, but if he could wave a magic wand, he would have the respective teams meeting each other much more quickly.
Ten months into being part of The Dains Group of Companies, how’s it going for Isosceles?
Mike reflected that it could be pretty lonely when you have had 20 years making all of the decisions. He’s now enjoying making decisions in the context of something much bigger and the context of greater ambition. For example, there is a plan to put an Isosceles team into Dains’ Birmingham office and plans to put a Dains team into Isosceles’ Sheffield office.
Mike has no regrets. The Isosceles brand and service lines will continue as they are. There is a high degree of collaboration with each company learning from the other. Richard has good judgment and an eye for finding businesses with similar values, so the integration is relatively straightforward.
An iFD CFO from the audience asked the penultimate question: Beyond scaling the business and financial support, what other value will Horizon Capital bring to The Dains Group of Companies?
The investment journey for Horizon and Dains is far from over, as other acquisitions are in the pipeline. Still, there are three areas where Horizon is adding value to Dains:
Building the team that sits around Richard
Initially, Dains was run as a partnership, so each partner was assigned an additional role, for example, ‘technology’, ‘human resources’, ‘finance’, etc. Richard was reluctant to change this and create individual roles as he didn’t feel the need to do so.
Horizon persuaded him otherwise and recruited some heavy hitters into key roles: Chief People Officer, Chief Operating Officer (who has significant tech industry experience) and a Chair (with a private equity background and expertise in scaling people-based businesses).
In hindsight, if there was something Richard would have done differently, it would have been to recruit the top-level people before the buying journey began!
Smoothing the acquisition integration process
Horizon can use its experience of acquiring businesses to pre-empt acquisition integration issues and help Dains to ensure this process is as smooth as possible.
The introduction of appropriate systems and technology
Data and reporting need to step up, and Horizon can help Dains get from their current historical reporting to insight reporting that speeds up and informs decision-making.
The final question also came from an iFD CFO in the audience: When is Horizon expecting to exit?
Emily confirmed that Horizon typically has a 3-5 year investment window. She admitted this was a large window, but without a crystal ball, she couldn’t tell the audience when the right time for an exit may be. The accountancy space is a fast-moving sector receiving a lot of PE investment, with 15 consolidators actively investing in this market, so many factors will influence this decision.
She concluded there is no point in doing a series of investments without ensuring all companies are effectively integrated, and that the Dains Group of Companies operates as a cohesive group.
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Author’s Biography
Written by Karen Stocker, Digital Marketing Professional who has worked for Isosceles since 2004.
Connect with Karen on LinkedIn
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