One Partner Firms - What Are My Options?

When it comes to selling and exiting, the good news is that there are probably more options than you think. Let's dive in...

The Options

1. Internal Succession

On paper this is a great option as the purchaser is a known entity, already familiar to the clients and the team, and presumably a strong cultural fit. In reality this often proves challenging to accomplish due to "the three C's". Not only do they need to have the right capability, they also need the capacity (financial) and the confidence to transition from an employee to a business owner. If they fail any one of the three C's it won't work, as is often the case. That is why many of the practice owners who approach us have already considered, and then passed on, an internal succession.

2. External Sale and "Traditional" Exit

In this scenario, the owner is ready to retire. He/she sells to a purchaser, transitions for a period of c. 12 months - full time or part time - and then exits. Nice and straightforward.

3. External Sale and Extended Exit

Here the Partner is looking to sell their practice but wants to continue working. We find this is quite common. Sometimes it can be because they want to realise the capital value of their practice now, or they want to spend less time managing the business and more time doing what they enjoy best - servicing a key portfolio of clients and finding new ones. Accounting owners wanting to set themselves up as Virtual CFO's post sale is another path we are starting to see more of.

We find this scenario to be reasonably common, and many buyers are open to it. They like the fact that the owner wants to stick around for an extended period because it helps with the retention of clients. We have even seen examples of vendors looking to stay 5-10 years post sale. 

4. Merge / External Sale for Equity

In this scenario the selling practice owner is looking to find a like-minded firm to join forces with, continue working and retain equity in the joint practice. Accelerating growth is typically a key driver of this, but so can the desire to no longer "do it alone" and have a peer to share the workload and bring a broader set of capabilities and experiences to clients.

These scenarios are again quite common although they typically result in more complex deals as the value of both firms needs to be agreed. Strong cultural fit is, of course, a must, as is a well constructed Shareholder Agreement.

The Wrap

So, in closing, there is always more than one option available. Our advice is to always be clear on your "why" ie what is your motivation for selling and what does success look like for you. This will help guide you down the path of choosing the right option. At DMY we have many conversations with practice owners weighing up their options and can provide a useful independent perspective. To discuss this article in more detail and what it may mean for your situation, contact one of DMY's Directors below: 

Mark Emney

Mobile: 0434 079 530
Email: mark@dmyassoc.com.au

Daniel Jones

Mobile: 0401 493 773
Email: Daniel@dmyassoc.com.au