How to Buy an Architecture Firm

It’s not just architects who buy practices, however. Engineers, construction firms, interior design firms and more may all be interested in acquiring a practice to expand their own business portfolio and make the specification and design phases of a project easier. 

Whether you’re an architect or another type of buyer, you’ll need capital in order to buy. In addition to a deposit, you’ll need to secure professional finance for architects.

Why buy an architect practice? 

As an architect, you may be wondering why you would ever purchase a practice over starting your own. The answer is simple: to take advantage of an opportunity.

If the selling firm has a good reputation, talented employees and a good client base, you can potentially leverage this to build your own reputation and enjoy higher profitability than you could attain when starting from scratch. In some cases, you may even be an architect at the firm already and want to buy it from your current owner who is retiring or selling for another reason. 

After reviewing vast amounts of architect buying commentary online, we also believe the further benefits of buying architecture firms include: 

• Injects new energy into a practice that has a good reputation but outdated digital/technological approaches – meaning future growth can be made better than ever. 
• Helps women get into leadership roles that have traditionally been harder to get promoted into. 
• Gives architects a chance to own a practice without the full ‘starting’ process, which means they don’t have to disrupt current projects to focus solely on developing a new practice. The purchase is a less intrusive route to ownership. 

While buying may help you ‘shortcut’ to success, remember that many firms are only as successful because of the Senior Principal and their reputation. You have to convince clients that your purchase won’t affect the standards and service they’ve come to expect. 

In some cases, the opposite scenario also presents opportunities. If you find a firm which is struggling or failing, you can purchase it in two different ways:

1. You purchase it and act as a Partner, allowing the firm to continue under another Principal Architect. This is often beneficial if you run your own successful practice but want to expand. 
2. You purchase the firm and assume Senior Principal position, becoming the owner and replacing the old one. This is usually only done if you don’t already have a firm of your own. 

In any of these cases, finding the right architect firm for sale is a case of doing the right research. Identifying practices for sale and knowing what constitutes a good opportunity is the most important part of the process. 

At Rangewell, we can help you even at this early stage. Our team are so experienced in the professional services industry that they can offer insight into both buying and selling – so we’ll act as an impartial partner that can advise you on any available practices you’re interested in. Following your selection, we’ll help arrange finance that works for you and your goals. 

Securing finance for an architect practice buy-out

When it comes to raising large sums of money for a professional service buyout, you’ll need to reach out to lenders – likely those outside of mainstream banks, as standard loans tend not to cater for niche sectors. 

In the case of an architect firm, you’ll need the help of professional service lenders who can assess the value of the business and its clientele rather than simply looking at the bricks and mortar value. 

The same lender will also build their offer based on you as a lender – analysing your sector experience and what you’ll bring to the table. If you’ve drafted a robust business plan and have years of experience behind you, it’ll be easier to secure finance on favourable terms. Even without those things, you can still find funding – it may just be at rates or terms that are more restrictive. 

With all of this in mind, the best route for finding a lender and arranging finance is to work with our team. Here at Rangewell, we’ll help you secure the finance you need with specific insight into the architecture and professional service lending market. Get in touch now to discuss your plans and see how we can help with everything from the business planning through to the sales agreement. 

Key considerations

Architecture is a respected and regulated industry, so it may come as no surprise that buyers must take a number of considerations into account. You should have these front and centre whenever you assess an opportunity: 

• Does the firm have existing works in progress or projects agreed upon that have yet to commence? How will the sale affect these works, and what guarantees can you get that the client will happily work with you as the new owner? 
• Is the existing firm accredited with RIBA? What level of engagement do they have in terms of engaging with CPD materials and other industry-specific programmes? How will the purchase affect this? 
• What office space and technology does the firm have? Is there a monetary value for the physical assets, and are you happy to purchase these things to operate from the same premises, or will you sell them off and take the new firm elsewhere post-sale?  
• Does the practice show a good understanding of recent compliance issues such as the Building Safety Act? 
• What guarantees can you get around client relationships and ongoing work? Architecture firms tend to have little in the way of equity or overheads, so client relationships and brand authority are your main purchases. 
• Will you end up with control when buying in? If you’re simply buying in as a partner, are you ultimately just paying to take on new responsibilities without reaping the benefits of ownership? 

Valuing a practice

If the firm is already listed on a marketplace, it will have a value attached to it or invite offers. Regardless of this price, you need to perform your own valuation as it’s critical to funding aspirations. When a finance provider assesses your application, they’ll send their own valuer to the firm to ensure it meets pricing expectations. 

Valuations for an architect practice are generally built by looking at the firm’s profitability over a period of time (usually years). When you, as a buyer, are having a valuation done, you must remember that the owner will have added sentimental and emotional value in mind when selling. 

You’ll likely be offering less than what the owner has initially set in their own valuation, so negotiation at this stage has to be professional and pared back from emotion. As a buyer, what you bring to the practice can also add value and help you negotiate on better footing. 

Solo or partner ownership

After finding the right practice, one of the first decisions is whether to purchase as a sole owner or with other partners. Most architecture practice sales are through retiring owners with no formal succession plan in place, which means many young teams of partners are finding opportunities to come together and buy into a practice. 

If you decide to go with a team of partners, you’ll need to either select one senior member to take on the finance and ownership duties or split it by partner and have each of you apply for finance. If some members are less senior or experienced than others, raising the right amount of finance may be difficult as lenders typically balance risk against your experience and past ownership history. 

Sole ownership is a more sound investment as it means you aren’t reliant on others for decision-making and can take on the firm with a level of authority you can’t reach when buying as a partner. 

Liability & legality

When you buy an existing practice, the seller will expect you to take on existing liabilities for projects. The liability period of US architects is fairly clear-cut, but in the UK, it depends on the nature of the project itself. Older legislation depends on the contracts agreed between architect and client, with some liability periods lasting six years up to 12. 

The Building Safety Act, which came into effect in 2022, has changed the way residential dwellings are treated and now extends retrospective liability for refurbishment and repairs for up to 30 years.

When buying the firm, check to see how well they have adopted the Building Safety Act’s standards and the ‘golden thread’ ethos. Making sure they have followed best practice and have robust documentation in place is crucial – otherwise, you may be hit with a legal claim up to 30 years after your purchase. 

As with a valuation, having a professional get involved to act on your behalf in terms of assessing liabilities is crucial. When applying for finance, the lender will want to see that you are aware of liabilities and outline them in your plan.

TUPE law for architects

When buying any business, you must be aware of The Transfer of Undertakings (Protection of Employment) Regulations, or TUPE. These rules protect existing employees and their existing contracts and conditions.  When you buy the firm, you’ll have to take their employees into your own business and give them the same accommodations they already have. An employee can refuse this and leave of their own accord, but will lose TUPE rights if they do so. 

As we outline in the next step, ensure employee agreements are part of their warranties when approaching your seller. 

Negotiation and agreements

When you approach your chosen firm to buy it, you’ll need to negotiate with the seller and have their legal team draft a sales agreement. This agreement outlines all of the assets being sold, existing liabilities, staff roster and can also include written ‘warranties’ which are protective statements such as “I know of no project completed in the last five years that has not conformed to the Building Safety Act”. 

When drafting the agreement, you’ll need a legal professional or buying agent to assist you in ensuring it covers: 

• Exactly what is being bought - offices, equipment, business etc. 
• What guarantees and warranties are offered? 
• What liabilities are in place that the seller knows about? Which does the buyer have to agree to? 
• Will you, as a buyer, have to accommodate any specific training or project requirements after the sale? Consider things such as mandatory CPD training for RIBA architects. 
• How will the payment be made? It may be best to agree to a deferred payment system whereby the seller receives payments at key dates. If you’re buying in as a partner, you’ll likely have to pay in one full payment. 
• What will happen to existing employees? How will TUPE be managed? 

Like with many professional service industry sales, you’re ultimately purchasing the goodwill, brand reputation, employee contracts and business name – the bricks and mortar value tends to be far smaller than the value of the business and its reputation. Make sure your agreement protects that and ensures both buyer and seller are happy. 

Securing finance for your purchase

You need to have finance agreed upon before you complete the sale – which is why we mentioned contacting lenders near the start of this article. The process can take a while so it’s important to get started early. Once you’ve applied, the lender will decide after conducting checks of their own (such as valuations and using a solicitor to check legal issues). The terms and rates offered will depend on how well you negotiate as well as your experience, existing capital and business plan. 

Ultimately, if your finance package is granted, you’ll be able to complete the purchase and begin ownership. Due to the complexities and the sheer capital involved in such a purchase, you should have help on your side.

If you want to see how we work, take a look at this case study which shows how we helped an architecture firm secure a much-needed office loan. Contact our team today for some no-obligation advice or to get started in your architect firm finance application.