Valuation & Deal Structures When You Want to Stay Part Owner in a Merger
Many accounting firm owners dream of merging into a larger group while retaining equity and influence. It’s a powerful way to access scale, resources and exit flexibility — without giving up your identity entirely. But the mechanics matter. In this guide, you’ll learn how valuations work when you’re not selling 100%, how deal structures can protect your interests, and what pitfalls to avoid in 2025 Australia.
Key Drivers of Valuation
Even in a part‑owner scenario, the same core value factors apply:
- Recurring revenue percentage vs project work
- Client retention rates & tenure
- Profit margins and cost efficiency
- Strength of systems, processes & documented workflows
- Growth trajectory, niche specialisation, scalability
Appraisers will apply risk discounts if your firm is heavily dependent on one principal or lacks deep process documentation.
Part‑Owner Deal Structures Explained
When you merge but retain ownership, firms often use **hybrid structures** that balance immediate liquidity and ongoing alignment:
- Upfront cash + equity: You receive cash for part of your share while holding equity in the merged entity.
- Earn‑out arrangements: Deferred pay based on future performance targets (e.g. revenue thresholds, profit goals).
- Clawback / retention provisions: Some value may be returned if key clients depart or targets aren’t met.
- Phased exit: Gradual sell‑down over a 3–5 year window, allowing transition control.
Negotiating Terms That Protect You
As a partial owner merging in, don’t be passive. Here are protective clauses to negotiate:
- Minimum profits or margin guarantees for your book.
- Non‑dilution or anti‑dilution protections if new investors join.
- Limits on equity dilution in future rounds without your consent.
- Override or veto rights on major changes affecting your clients.
- Clear exit triggers or put options after set timeframes.
Tax & Legal Considerations in Australia
Structuring a part‑owner takeover has tax ramifications:
- Capital Gains Tax (CGT) on the portion sold — structure to maximise the 50% discount if eligible.
- Stamp duty or transfer duty in some states depending on asset vs share sale.
- Employee entitlements or superannuation for continuing staff under new entity.
- Ensuring your Tax Practitioners Board (TPB) registration transitions appropriately.
Example Scenario
Jane, owner of a boutique tax & advisory firm in Brisbane, merges with a mid‑tier group:
- She sells 60% for cash today, retains 40% equity.
- She commits to stay 3 years, with a clawback if core clients leave.
- She retains decision rights over her niche vertical.
- Her firm’s systems are upgraded, boosting efficiencies and future value.
Over 4 years, Jane receives additional payouts, and has the option to fully exit once her retained value is monetised.
Takeaway
Mergers where you stay on require more nuance than a straight sale. But when structured well, these deals can offer liquidity, support, and strategic alignment — without forcing you out of your firm. With the right negotiation, equity protections, tax planning and governance, you can merge up while staying true to your clients and legacy.