What are your market options?
Time Poor; let’s go to brass tacks:
It’s been a roller-coaster for the last 3 years with COVID and now Inflation is pushing us around… who would have thought finding good staff would be so hard – well, it always has been, it just got harder, more expensive and they don’t even come to the office.
- What am I worth?
- What are the options?
- Will they fix my problems?
- Then what?
Roller-Coaster affected Market valuations are still in premium territory, with $1.20 being the new $1.00, or so a BANK said. But, before you jump onto this thinking, great let’s do it, remember this is a premium and that comes with terms and conditions. We have seen practices sell for more and we have seen some sell for less.
Accounting Practice Buyers – Sample:
- Individuals leaving larger firms: Quiet
- Small, Medium and Large Practices: Yes
- Market Known Local Consolidators: Yes
- New to Market Consolidators: Yes
- International Consolidators: Yes
- Financial Planning Groups: Quiet
Terms:
- Sale Price: Negotiated
- Upfront percentage vs Clawback: Negotiated
- Revenue Targets: Negotiated
- Profit Targets: No, be careful here
- WIP & Debtors: Vendor keeps them, unless bought by Purchaser
- Ongoing Role: Negotiated
Time to Settlement after Vendor/Purchaser Introductions:
- 1 week: Dangerous, slowdown, you’re missing something
- 4 weeks: Curious as to how it is transpiring
- 6-8 weeks: Healthy, review of culture impact
- 12 weeks: The average timeframe
- 6 months: Slow, but this is ok too
- 12 months: Probably doesn’t want to sell
Solutions Sought in Transactions:
Staffing is NUMBER ONE: Don’t just bank on the target’s staff staying
- Key Staff of Buyer, buying in or becoming Partner: Great focus point
- Reduction of workload (Buyer or Target): Maybe, although doubtful at start
- Scalability and efficiencies: it takes 12 to 24 months for healthy momentum
- Service offering expansion: Gently integrate the cross sell or pushback will appear
- My problems will all disappear: Sadly, there is no silver bullet – it takes hard work
Now I Have Sold, what’s next:
- Dream: you should know what you want to do and already be doing it prelisting
- Will they keep me on? – of course, if you want, but not always: Negotiate
- Will I be remunerated the same amount? – no, probably not: Negotiate
- Will I lose control of the business after settlement? Strong possibility: Negotiate
- Can I start up again? Not normally. Strenuous restrictive covenants: Negotiated
- Can I just walk away: Yes, you can negotiated a Walk-In-Walk-Out: Discounted Value
When a buyer comes to the table, tells you everything you want to hear ask yourself:
What don’t I know about this person, this institution and how can I check?
- A GOOD CULTURAL FIT because ‘THEY SAY SO’ – whiteboard it and do it again
- Am I excited over a deal that isn’t true market valuation? Biases give away true value
- What is the ongoing role deemed necessary to ensure full payment of the clawback?
- TERMS: What’s hidden in the terms? What’s hidden in the contract? Question them
- Are they hunting YOU or are you hunting THEM: Strategize Culture, Price, Terms
To Note:
- Every deal is a two-way negotiation
- Culture takes time to rise – are you willing to change?
- If it’s about the clients’ future, do a strong reverse Due Diligence
- Be careful about the Buyout and Hang-back targets imposed
- BlueSky dreaming are just bright lights that can lead to disappointment
- In desperation you need to trust someone – Buyers will lowball
- Ask for everyone’s’ experience. Good and Bad
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Thinking of SELLING in 2023?
Thinking of BUYING in 2023?
Thinking of MERGING in 2023?
Let’s Talk
Magnus Yoshikawa – 0408885944
We will come to your favourite coffee shop; first one is on us!
