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Pro Webinar 116 December 16, 2015

Accountant Partnering System (APS) Letter of Intent (LOI) and Acquisition Cash Flow Worksheet - - Keep the Target Company Execs on Board by Defining the Deal and Simulating Cash Flows to Enhance Transparency
 
Starting
Time Code
hr;min;sec
0;00;00 Sign on message
0;00;45 APS is Off the Charts and You Could Do This in Your Business too
0;01;05 Quick Growth requires Rapid Adaptation to Changing Circumstances
0;02;26 LOI and Excel Spreadsheet here will not match exactly now/yet
0;03;12 APS offers to Accountants are as varied as night and day
0;04;45 Accountants are trained to see 1x Gross Billing as Base Practice Price
0;06;05 BF Pros are trained on Cash Flow-EBITDA as Base Factor for Pricing
0;06;52 LOI forms a Starting Point by use of a Basic Transaction Summary (TS)
0;08;50 LOIs are a Selling Document not simply a set of expectations for seller
0;09;27 TS provides some choices for Seller and Clear Definitions for deal
0;12;00 Acquisition Method needs Minimum After Tax Cash (Sec M-13 Var 3)
0;13;30 Ex.: Our $1 buys 1 NewCo Share = 55% of ABC Shares @ Pur. Price
0;16;38 Terms of Purchase: Cash and a Convertible 5 Year Interest Only Note
0;17;55 Convertible allows future choice of specified Note Value or IPO Stock
0;19;23 Conversion Value of Note ends discussion & sets expectations for IPO
0;22;00 Initial Percent Financed by Sale-Leaseback of Intellectual Property
0;23;30 Cost & Amortization of Financing is paid by NewCo not ABC cash flow
0;25;57 ABC Partner Profit Payouts are in Cash per Retained Share % of ABC
0;27;17 Partner Profits include share of ABC plus NewCo’s Aggregated Profits
0;29;17 Accountants get Sweet Deal, Fun looking at Details, & Real Wealth
0;30;20 Remaining Percentage of ABC will Convert at a Discount to IPO Price
0;33;33 This Deal is for Aggregation Hub Firms who have Key Top Personnel
0;37;20 This then shows How to Multiply Value in Companies You Acquire
0;37;50 The LOI details Timing of Drafts, Agreements, and Final Outcomes
0;39;25 The Outcomes Produced allows for a simple, few page LOI
0;40;00 Management & Accounting Practice Survey Standards (MAPSS)
0;41;30 Purchase Price adjustments that include MAPSS factors is credible
0;42;40 LOI will list special assets of ABC and responsibilities prior to close
0;43;22 Partners & NewCo want zero surprises and zero gotchas
0;44;45 Functions are divided into three entities (see BF Pro Webinar 114)
0;45;33 LOI states that ABC Partners will be Fairly Treated as Minority ‘Holder
0;46;57 LOI describes how ABC Partners will apply Aggregation to mutual gain
0;48;18 Partners essentially get paid twice – once at close, next in NewCo
0;49;53 At Close the Partners chump change ($35K of $1M+) buys more NewCo
0;51;05 Recruiting Key Employees of NewCo will include Stock Options
0;53;00 Partners acquire shares if their Management manages NewCo
0;57;10 Liquidity Event specifies timing of IPO making their shares fungible
0;57;53 Intent shows parties ability to exit deal except on confidentiality
0;58;07 Exclusivity Period protects the investors from a disruptive, new deal
0;58;48 Non-Circumvention protects all parties from disruptive, side deals
1;00;45 The Acquisition Simulation of Cash Flow Spreadsheet (w/o Interest)
1;04;04 This version has NewCo Stock payment rather than Convertible Note
1;04;47 The Aggregation Income also nets a 35% share to the ABC Partners
1;05;50 Cash Flow Spreadsheet helps ABC Partners Convince Themselves
1;07;12 At closing ABC Partners yield a 512.6% ROI on remaining 35% equity
1;08;10 @61 months= $12.7M + $5.4M + $23.9M+ $53.8M & $52M in NewCo
1;08;49 NewCo’s share of ABC pays for all of the Acquisition Payments
1;10;34 Payments = Mezzanine (IP Sale-Leaseback) + Senior Debt (5yr Note)
1;11;49 Cash on Hand grows until 60th month for Payoffs and Final Payments
1;12;36 IP Buyback payment: $4.4M w/ after tax costs of 16.5% (28% pre-tax)
1;14;18 Senior Debt payment: is $2.7M with 5.6% after tax cost (8% pre-tax)
1;17;01 Where Does the Money Come From: A. Organic Growth + Acquisitions
1;19;00 After 40th month money starts to come into NewCo’s growth system
1;20;18 ~B. Delta (Balance) = Forecast Earnings – Financing – Partner Payouts
1;22;04 ~ Delta belongs to NewCo as the Partners have been paid their share
1;23;20 All of the Earnings Estimates and Projections are Conservative & Slow
1;24;31 Income is ONLY from NDFC Services which rollout slowly year-year
1;25;44 New Service expansions are slow to allow time to be an advantage
1;27;48 Recap: A Complex Process using Solid Tools that Enable Transparency
1;88;53 Assumptions are Modelled using RMA Studies of Existing ABC Clients
1;31;16 Finally: Spreadsheet lets Outcome Be More Likely than Less Likely
1;31;53 Thus: Logically (like a CPA wants) the Deal Is The Right Thing To Do
1;32;33 Q – Some NDFC vendor relationships will remain proprietary
1;33;55 Q – IPO is open to any NDFC Rep who brought in a deal
1;34;58 Q – Key CPA firms will be a City’s Core Firm rather than a Hub Firm
1;36;32 Q – Top Superstars in Related Disciplines will be added as discovered
1;37;29 Q – Business Strategist Team, etc. will take Gordon’s day-day jobs
1;40;50 Q – Entrepreneurial CPA firms to Target Range from $5M to $50M now
1;43;53 Q – Below 12 largest CPA firms, the top one does less than $500M
1;42;08 Q – Likely only 5 or 6 larger firms are Entrepreneurially Managed
1;46;42 Call Gordon to Discuss your role & Use this Model for Your Business
1;47;39 Study & Review Time is required for fluency in these deals’ intricacies
1;49;07 Support within NDFC-APS team will Bridge Gap & help learners
1;50;22 Beginning of signoff message

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