1. Succession Planning For Accounting Firms Joel Sinkin Accounting Transition Advisors

2. About the firm: Merger and transition advisors exclusively serving the accounting industry Customized solutions Over 950 transactions, over 18 years of experience Represent the buyer or seller Services include:  Buyer-seller introductions  Merger and acquisition transaction structure  Document preparation/review, valuation and due diligence  Post-transaction business planning  General consulting and coaching

3. If there are 50 things you need to think about in a transaction……. ……the smartest of us will think of only 35

4. Why is Activity So High? Competition Staffing Technology Niche Development Aging of the partners/staff The economy

5. Three Ways to Grow One client at a time Develop marketable niches Merge or acquire another firm

6. Starting the Transition Process When should we start? How many more tax seasons do you want to work? Client “face time” Investments including technology, leases, staff Start succession process during establishment of new firm and partnership agreements are in draft

7. How Do You Find a Candidate? Advertising Networking Direct Mail Outside consultant or broker Internal search

8. Is Your Successor Ready? Do you know………. …… why the other firm wants to merge?....... the staffing situation/excess capacity? …… their physical space requirements? …… current technology and equipment? …… financial strength or issues? Bigger is not always better!

9. How to Select a Successor Specialties that you offer that they would need to understand Size of successor, retention rates and excess capacity Billing rates/ Professional credentials Location(s) Culture

10. How to Select a Successor Financial strength Professional/staffing strength Ethnic/language considerations Longevity of partners Employee track record

11. What is the Seller Thinking? “I am irreplaceable” “I am MASTER of my own domain!” “Clients NEED me” “If I retire, I’ll die!”

12. Sales – Internal v. External Internal Sales Almost always go for less Often no retention period Death, disability and penalty buyouts Remaining partners making more Non multiple formulas on gross are more common Accounts Receivable & WIP External sales are more of a “business” deal and go for high dollars

13. Sales – Internal v. External Things to be wary of………… Multiple partners, leaving simultaneously Partners reducing time commitment, but not income or control Replace the role, not the body Cannot replace the administrator with a “Rainmaker” Must have excess capacity Partnership agreements (check them annually)

14. Attracting the Best Talent WANTED: Smart, energetic, hardworking, client-focused, future thinking, flexible professionals to join our fabulous firm!

15. Pointers for Finding Talent You can’t attract talent with empty offices Quality of life issues are important Reward the Rainmaker Need staff to do the work Leadership qualities Sweat equity should count! Baby boomer crisis looms ahead

16. MERGERS FOR SUCCESSION Two Stage Deals ▫Concept is remain whole in compensation, remain in control while commencing transition ▫Structure ▫Case Study Example ▫Built in practice continuation agreements Do Practice Continuation Agreements work

17. MERGERS FOR SUCCESSION Have agreed upon time tables for the role reductions of the retiring partners Cull out sale Have everything in place before you start: ▫Terms ▫Transition plan ▫The capacity to takeover the retiring partners ▫Space, staff, firm name

18. Do your homework! History and background of the firm Client retention rates Billings vs. collections, billing rates Compensation packages of all firm members Employee manual, employee contracts Furniture, equipment, assets and leases Pricing, billing and collections Profitability Due Diligence

19. Clients Who does the work Where is the work completed? How many clients require face time? Fees Industries served Services for clients Collections age analysis of A/R and cash flow (per month) Focus on how you will run the firm, not how it is currently managed

20. Firm culture Potential exposure issues Quality control issues Retention rate of employees Work papers Leases or other obligations

21. Other Thoughts General “chemistry” between the parties Continuity of relationships will help retain clients A good deal is a fair deal Remember, it’s the package, not the individual variables Staff merging

22. Other Thoughts Documentation Restrictive covenants Roles and responsibilities Hold Harmless Basic firm contact information Arbitration for disputes Divorce clauses, where appropriate Accountability of both parties

23. The Transition….. Client Communications Roles for new staff members Specialization Other Thoughts

24. For more information Please visit our website for resources including free reports, whitepapers and case studies. Joel Sinkin Jsinkin@transitionadvisors.com 1-866-279-8550 www.TransitionAdvisors.com