Structure

• Combination of cash for the owner, investment capital in the business and/or equity in the overall enterprise of Starfish Partners
• Individual needs and desires are addressed.
  Options include:
  – loans for growth, to fund equity for key associates
  – capital in exchange for equity
  – equity swap for some/all equity in Starfish Partners
• Outside tax and transaction experts deployed by both parties to ensure the appropriate valuation and business structure
• Legal shareholder agreements are prepared to reflect every consideration in the transaction

• Centralized back office and resources in most transactions allows focus on business growth rather than operations
• Increase in collective valuation based on mitigation of risk of any one entity (where applicable)
• Flexibility in structure allows for custom solutions based on individual owner needs and desires
• Increased talent attraction, retention, and career path opportunities for all
• Ability to maintain the individual brand, culture, and models but with the support and collaboration of the collective
• Benefits all stakeholders: clients, candidates, associates, suppliers, and owners

• Balancing the desire for confidentiality and transparency
• Need to engage outside trusted advisors who likely have little experience with transactions in this space
• Risk and cost/benefit analysis for each potential transaction
• Time investment in exploration as well as overall market timing
• Fear of financial controls, change and market adjustments.

• Starfish Partners provides capital for the owner(s) to invest as they see fit in their business
• Loan and interest payback scheduled based on some combination of minimum, percent of revenue and/or percent of revenue
• Back office of the organization is run by Starfish Partners in exchange for a percent of revenue
• Offices are considered for membership into Sanford Rose Associates (SRA) for support to scale in exchange for royalties (SRA offices benefit from discounted back office services)
• Financial guardrails are established until the loan is retired at which point back offices fees are reduced
• Back office fees continue in perpetuity but upon the retirement of the loan, such fees are reduced and a termination provision is provided

♦ The number one reason for business failure and lack of growth is access to investment capital. In almost all cases, business loans must be backed by sufficient personal assets to underwrite such risks. Most venture debt of high-risk enterprises necessitates equity for the lender and in many cases, a majority stake. This structure allows the owner to focus on business growth over the struggle of personal billings to fund scale. The firm is provided with counsel and operational support and, in many cases, the full benefit of all resources of the Sanford Rose Associates Network.

• Starfish Partners provides capital in the form of a loan to the key personnel to purchase equity within the organization
• Current owner(s) is provided with what, in most cases, is a long-term capital gain on the sale of some/all of their equity
• Key personnel is provided an opportunity for ownership and current owner(s) can maintain the level of control desired
• Loan and interest payback scheduled based on some combination of minimum, percent of revenue and/or percent of revenue
• Back office of the organization is run by Starfish Partners in exchange for a percent of revenue
• Offices are considered for membership into Sanford Rose Associates (SRA) for support to scale in exchange for royalties (SRA offices benefit from discounted back office services)
• Financial guardrails are established until the loan is retired at which point back offices fees are reduced
• Back office fees continue in perpetuity but upon the retirement of the loan, such fees are reduced and a termination provision is provided

♦ Most every professional services firm offers partnerships/equity in their firm. The most likely candidate and highest value for your firm’s acquisition is from your associates. Yet, 99% of the time, the owner must finance and assume 100% of the risk from mismanagement and default. This approach provides for stable and secure succession, independent control, and the greatest outcome of low risk for current owner(s) with a maximum reward for future owners. It maximizes talent acquisition and retention. It aligns key individuals with business ownership. It incentivizes increased individual/team production and connects profitability considerations to spending decisions. It provides long-term wealth-building opportunities for those responsible for revenue generation and growth.

• The valuation of the owner’s equity increases in overall valuation due to the mitigated risk of any one entity
• Cross-selling and increased delivery capability between firms maximizes the potential for increased revenue and profitability of the organization and the collective
• Liquidity of stock significantly increases
• The potential desire for additional ownership increases due to dozens of owners with a collective goal of increased value
• Expanded career growth opportunities within the operations/leadership team possible across many other platform organizations
• Long-term increased value through future strategic investors and additional equity programs tied to the acquired firm and overall entity’s growth

♦ A singular business has issues with liquidity, capital, and organizational scale. This option will require the greatest amount of due diligence and scrutiny. Organizations must be synergistic, not competitive, and must be able to integrate culturally and operationally. Individual circumstances will dictate the continuation of an individual brand versus integration into one of the other existing brands and portfolio organizations.