Preparing Your Firm to Grow

Transcription

1 Preparing Your Firm to Grow Through M & A June 23, 2016 Presented by Terrence E. Putney, CPA CEO, Transition Advisors, LLC

2 NASBA CPE Earned Credit Guidelines Transition Advisors, LLC is a proud and approved sponsor on the National Registry of CPA Sponsors per the National Association of State Boards of Accountancy (NASBA). In order to receive your one CPE credit You must complete two requirements GOTO webinar system monitors your participation and you must participate in three polling questions during the presentation. An Evaluation Form will be ed to you after the webinar ends and it must be completed and returned back to us before we can your CPE Certificate of completion. The certificate will be ed to you within 10 working days. A survey for this webinar will appear immediately after the session ends, so please take a minute to complete our survey before closing your browser for GOTO webinar. This survey is very important to Transition Advisors, as it helps us in providing you quality information.

3 Attendee Control Panel In order to fully participate in the webinar, please familiarize yourself with your GoToWebinar control panel on the right hand side of your screen. The orange arrow on the top of the control panel is to minimize the control panel. During the presentation, all participants are muted but you can communicate with us using the question box towards the bottom of your control panel on your screen as a method of sending us your questions and/or comments. Just type your question in the box and click send. The presenter will answer all your questions during our presentation and we welcome your participation.

4 Upcoming Webinars Transition Advisors, LLC offers FREE twice-monthly CPE courses July 7 The Art of Your Deal July 21 How to Structure Your Partnership Agreement August 4 Growing Your Firm Through New Practice Niches August 18 Preparing Your Firm for an Upstream Merger Visit transitionadvisors.com/upcoming-courses.php for more information.

5 Transition Advisors, LLC You may obtain a hard copy of this presentation by making a request by to Nicki Johnston, Marketing Director, Transition Advisors, LLC. Please send your name and mailing address to njohnston@transitionadvisors.com This information will be repeated at the end of the presentation

6 Transition Advisors, LLC National consulting firm working exclusively with accounting firms on issues related to ownership transition

7 Agenda Business Plan Assessing the Market and Your Firm Selling Your Opportunity The Deal Process Deal Structure The Four C s

8 Polling Question How many equity partners do you have in your firm?

9 Business Plan What are your strategic goals? Should dictate what you are looking for and where General revenue/client growth Partner level growth New geographic markets New service lines Clients to cross-sell existing service lines Talent search

10 Merger v Purchase Rules of thumb for each When to use a merger When to use a purchase Combo deals

11 Resources Deal terms Working capital Technology Facilities Training Synergistic cost savings

12 Aligning Your Partners Who are your decision makers? Identifying obstacles Required investment Partner compensation Equity Client mix De-merger clauses Acquiring talent versus buying a business

13 Assessing the Market Buyer s or Seller s Market? Seller motivation Competition

14 Valuations Trends Five components of deal terms affect on value Assessing the profitability of the acquired firm Valuations in mergers

15 What Are Sellers Looking For Fear of uncertainty Maintain income Immediate sales v slower transition Cherry picking Why so many want a big down payment

16 What MergeesAre Looking For Upside No out of pocket Income certainty Fear loss of control Fear accountability

17 Polling Question Our current level of interest in M & A is: Experienced, currently looking No experience, actively looking Not sure, intrigued Not sure

18 Seven Step Process Identifying target firms Preliminary data Intro meetings Non-binding offers Due diligence Final agreement drafts Transition

19 Identifying Target Firms Networking Databases Consultants Initial contact

20 Preliminary Data On your firm Volume Employees Partners Services Industries Locations

21 Preliminary Data Target Firm Volume Business v individual clients Major clients if any Staff makeup Partner makeup Billing rates Lease details Profit margin (before owner comp)

22 Polling Question Please send me a copy of a Practice Summary Sheet Yes No

23 Introductory Meetings Share your business plan for the merger/acquisition Seller motivations and desired objectives Find out as much as you can while selling the benefits of joining your firm Goal is to have no more than one or two introductory meetings before you decide and proceed

24 Non-binding Offers-Acquisitions General deal structure Partner roles and compensation Business plan for the combination Treatment of existing facilities Timing and remaining steps in the process

25 Non-binding Offers-Acquisitions Deal terms Pricing Retention adjustment Treatment of new business Tax treatment Treatment of AR, WIP, FF&E LOIs versus Offer Letters

26 Non-binding Offers-Mergers Your owner agreement Defining what equity means and determining it Compensation issues Capital contributions Business plan for combined entity Upside opportunities

27 Due Diligence & Agreements Why wait to perform due diligence What to review Tips on agreements

28 Transition What defines a good merger or acquisition? Continuity-behind the door and in front of the door Communication-the five questions very client asks Selecting and preparing the messengers

29 Polling Question What issues do you see affecting your practice most in next year? Succession for retiring partners Admitting new partners Client retention for retiring partners Need for growth

30 Deal Structure-Two Stage Deal Stage One-usually up to 5 yrs Seller merges into buyer s firm Starts the transition process Maintain reasonable control over clients Take on a principal s or nonequity partner role Maintains compensation level

31 Deal Structure-Two Stage Deal Stage Two-paying for the practice Seller transitions to a part-time or retired role If working, a per diem rate Purchase is now based on a practice that has ALREADY transitioned

32 Deal Structure-Merger Mechanics Standard owner agreements Partner criteria Identify what is being exchanged for what Identify exceptions and commitments Bridge agreement

33 Four C s Chemistry Capacity Continuity Culture

34 Articles CPA Firm Succession Series July, 2013 thru June, CPA Firm Valuation Series October, 2014 thru December, The Culture Test May, How To Maximize Client Retention After a Merger April,

35 For More Information Visit the AICPA Succession Planning Resource Center /center/pages/default.aspx

36 Gary Adamson, Adamson Advisory Bonnie Buol Ruszczyk, bbr marketing Sarah Dobek, Inovautus Consulting Angie Grissom, The Rainmaker Companies Dustin Hostetler, Boomer Consulting Rita Keller, Keller Advisors Roman Kepczyk, Xcentric Tamera Loerzel, ConvergenceCoaching Terry Putney, Transition Advisors Rick Solomon, Thriving Firm Carrie Steffen, The Whetstone Group Sandra Wiley, Boomer Consulting Jennifer Wilson, ConvergenceCoaching #SuperConf15

37 Bridging the Gap: Strengthening the Connection Between Current and Emerging Leaders in the CPA Profession Amazon.com $49.97

38 Free White Papers on Industry Trends CPA Firm Leadership: Communication Drives New Possibilities Measuring Happiness at Work: How Firms Can Win With a Happy Culture Top CPA Firms Succession Challenges Download at:

39 Transition Advisors, LLC You may obtain a hard copy of this presentation by making a request by to Nicki Johnston, Marketing Director, Transition Advisors, LLC. Please send your name and mailing address to njohnston@transitionadvisors.com This information will be repeated at the end of the presentation