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Acquisition Structures

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Bruce Warren
Bruce Warren

What type of acquisition structure seems to be the most common in todays acquisition environment and is that format limited because of external influences?

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Terrence Putney
Terrence Putney

Good question, Bruce. The type of structure that is applicable to any specific situation needs to fit the objectives of the buyer and seller. But there is a common theme we are seeing. That is many firms and practitioners seeking succession and therefore a sale or merger recognize the need to get their successor in place but are not ready to hang it up and leave behind their compensation. We see many of these firms addressing this need anywhere from 2 to 5 years before they are ready to substantially slow down. So they face a conundrum. How do they put the solution in place now without selling and walking away from their current level of income? This issue also comes into play when one or two partners are 2 or 3 years away from wanting to slow down and the rest of the group has no immediate need for that and seeks a stratight forward merger.

We have found a two stage deal fits this need and creates a win-win solution both for the firm seeking succession and the successor firm. A detailed descriptoin of this technique can be found in the attached article puclished in the Journal of Accountancy. In essence this deal structure allows the firm or practitioner seeking succession to affiliate with the successor firm, put a binding buyout agreement in place, start the process of transitioning the practice, and maintain their current level of income while they continue their full time commitment to the practice for the next several years. The successor firm postpones the majority of the investment in the acquisition until the practitioner or partner moves to a part tme or fully retired role and gets the benefit of a controlled transition of the practice leading to very high retention.

Download Attachment (Two_Stage_Deals_(JOFA_3-06).pdf)

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