Owner Transition: Recent Trends

Source: Journal of Accountancy

Joel Sinkin and Terrence Putney discuss recent trends in managing ownership transition in CPA firms and the critical role the owner's agreement plays. Some of their observations:

• When it comes to valuation of firms, the trend is decreasing multiples. Most firms were using one times revenue or three times historical compensation as recently as 10 to 15 years ago. Today, around half of firms use less than one times revenue, and a slight majority of firms use less than three times historical compensation.
• Increasingly, firms are modifying their retirement terms to make buyouts more affordable for younger partners.
• Owner's agreements have a big impact on a firm's ability to attract and retain young professionals. In particular, lack of a mandatory retirement age is a turnoff for up-and-coming partner candidates.

For the complete article, read “Managing owner transition through an owner's agreement.”

From Journal of Accountancy, March 2014, www.journalofaccountancy.com/Issues/2014/Mar.