How to Achieve a Successful Sale or Merger

DMY has sold over forty practices in the last two years.  Here are our 8 Essential Rules for successfully navigating the selling or merging process and setting yourself up for a successful outcome.

Rule 1: Know your "Why"

The starting point is always: what is your “why”? ie why do you want to sell or merge, and what are you going to be doing next with your life? For many owners selling is a logical culmination of a lifetime’s work building their practice: they have reached an age where they are ready to wind down and enjoy the fruits of their labours.

For some owners it can be more complicated. Health reasons can be a factor, either for them or a family member. For others it may be that they have achieved what they set out to do and are ready to take on a new challenge. We have seen this with practice owners in their fifties, their forties, and even their thirties.

It is also common to see practice owners who regard the sale and exit from their practice as two quite distinct events. Typically they enjoy working with clients but, as their practice has grown, have found they spend too much time on the operational side of the business and less time with clients. For these owners, a sale is a way to take advantage of a purchaser’s back office to free themselves up so they can spend more time doing what they enjoy most while someone else takes case of all the operational “stuff”.

Rule 2: Be Clear What Success Looks Like

There are a number of elements to a successful sale. These obviously include the commercial outcome – the sale price; retention terms; the lease (particularly if the premises are owned by the Vendor); fixed assets; and work in progress – but also

• How the clients are looked after
• What happens to the team
• The Vendor’s role and remuneration in transition
• When the Vendor wants to stop working
• The length of time to sell

We always encourage would-be sellers to think through what is most important to them and visualise what a highly successful outcome looks like. It’s much easier to achieve if you are clear on the end goal!

Rule 3:  Clear Your Head

It is vital to go into a sale process with a clear head. Most practice owners haven’t sold before and it can feel like a big step in to the unknown. Selling your practice can often go smoothly, but it can also be stressful and an emotional rollercoaster.

Meeting with potential buyers, evaluating who will be the best fit, negotiating the commercial terms, and finalising contracts of sale are all important elements of the sale process that require clear thinking. A good broker will support their client as a trusted advisor through all of these steps but the buck still stops with the seller. If there are a lot of other things going on in your life, is now the best time to be selling?

Rule 4: Understand current market values

If you were selling your home, or car, no doubt you would undertake research to see what the market was doing. Selling your accounting practice is no different. Whenever we meet with would-be sellers we encourage them to ask lots of questions:

• How many buyers are out there?
• What are firms selling for?
• How long will it take? etc

At DMY we have lots of market data at our finger tips and are happy to share this with practice owners. This includes selling prices and key terms such as retention percentages and duration.The better a would-be seller understands the market the more likely they will be equipped to navigate the sale process and achieve a successful outcome.

Rule 5: Make first impressions count

 You only get one chance to make a first impression! At that all important first meeting make sure: you are prepared; you've done your research on the buyer and their firm; and you are ready with to talk about yourself and your practice. Be relaxed but professional.

Rule 6: Assess cultural fit early

If the cultural fit isn't strong then it doesn't matter about the commercials and other aspects of the deal. Don't try and force it, it won't work. 

Our litmus test for cultural fit when we are talking with our clients (the seller) is always:

1. Can you see yourself working well with the purchaser?
2. Can you see your team working well with them?
3. Can you see your clients working well with them?

If the cultural fit is strong, then put your best foot forward to secure the deal. This is the one you have been waiting for!

Remember also that assessment of cultural fit can change over time through the course of the sale process. How the other party deals with negotiating the Heads of Agreement or the due diligence phase can give indicators to either validate the cultural fit or raise a flag to be considered.

Rule 7: Have a high degree of empathy 

We have seen some terrible examples of buyers showing no regard for the feelings of the seller by highlighting all the things they see wrong about their practice and treating the sale in a wholly transactional manner.  But this can also happen in reverse ie sellers want to sell their practice then retain control and not be told what to do because "their way is the right way".  Sellers should walk in the shoes of the buyers (and vice versa) to build trust and show that they are are the right acquisition target and will be easy to work with in transition.

Rule 8: Avoid moving the goalposts 

We always encourage our clients, the seller, to execute a non-binding Heads of Agreement covering the key commercial terms. This ensures the seller and buyer are aligned, and saves time and money when it comes to lawyers drafting the binding sale documents. While the Heads of Agreement is non-binding it's never a good look when the either the seller or the buyer tries to change the commercial terms in the Contract of Sale without reason. It damages the trust that has been established and can be a significant red flag to the other party, even resulting in deals falling over at the 11th hour as a result. The introduction of lawyers into the sale process at this point can also increase the risk of this happening and it's important that lawyers on both sides are fully briefed on what has been already agreed and is not up for further negotiation.

In summary, if you are looking to sell or merge your practice,  these 8 Essential Rules When Selling Your Practice will help you navigate through the process and set yourself up for a successful outcome. 

We also encourage sellers to read the accompanying blog: 8 Essential Rules When BUYING A Practice. This will really enable you to walk in the buyer's shoes. You won't be surprised to see that a number of the Rules are the same. We are firm believers that the best practice sales / purchases are those where there is a genuine win-win between the two parties.

To discuss these findings in more detail and what they mean specifically for your situation, contact 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