{"id":55459,"date":"2018-10-07t06:30:45","date_gmt":"2018-10-07t10:30:45","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=55459"},"modified":"2018-10-31t14:18:04","modified_gmt":"2018-10-31t18:18:04","slug":"14-partner-agreement-issues-in-mergers","status":"publish","type":"post","link":"\/\/www.g005e.com\/2018\/10\/07\/14-partner-agreement-issues-in-mergers\/","title":{"rendered":"14 partner agreement issues in mergers"},"content":{"rendered":"
<\/a>make sure you’re looking at the big picture.<\/strong><\/p>\n by <\/i>marc <\/i>rosenberg<\/i><\/p>\n this post applies only to transactions that are true mergers, which require the sellers to sign the buyer\u2019s partner agreement.<\/p>\n more:<\/b> partner agreement issues affecting women<\/a> | mandatory retirement: pros and cons (and is it legal?)<\/a> | deciding how to allocate partner income<\/a> | making partner: today\u2019s 15 essential skills and traits<\/a> | how to specify managing partner duties<\/a> | when votes must be taken, what are the options?<\/a> | a crash course in partner retirement\/buyout plans<\/a> | protect your business with a solid partner agreement<\/a><\/p><\/blockquote>\n in a sale, the owner(s) of the seller don\u2019t sign the buyer\u2019s partner agreement because they won\u2019t become owners of the buyers. merger agreements<\/strong> are primarily intended to confirm the merger\u2019s deal terms. merger agreements typically address issues in far more detail than partner agreements. examples will be given later.<\/p>\n another potential point of contention: at small firms it\u2019s common for most decisions, large and small, to be voted on in partner meetings. at larger firms, most decisions are reserved for the firm\u2019s management, primarily the managing partner, the executive committee, the coo and department heads. at larger firms, voting by all partners is usually reserved only for significant issues such as mergers and admission of a new partner.<\/p>\n smaller firms often don\u2019t have mandatory retirement provisions. their partners can\u2019t conceive of being forced to retire before they want to. many wish to work well into their late 60s and 70s.<\/p>\n i was involved in a situation where the seller\u2019s owners had to check their egos and titles at the door and focus on the tremendously attractive deal terms that were offered.<\/p>\n in mergers where the seller\u2019s owners are not<\/strong> retirement-minded, it\u2019s natural for them to want to come into the buyer as equity partners. after all, they have been partners at their own firm for 20 or more years. accepting a lesser position feels like a demotion and is insulting and embarrassing.<\/p>\n but sellers need to cast aside their egos and emotions and look at the attractiveness of the basic deal terms.\u00a0 here\u2019s a great example.<\/p>\n a four-partner firm with a great specialty asked me to find a larger merger partner. two of the owners were 45 and two were 58. their average partner income was an unexceptional $250,000. their $3 million of revenue was flat. none of their staff had partner potential. they were skeptical that any<\/strong> buyers would be interested in them.<\/p>\n i found them three buyer candidates. one in particular was a top 20 firm that confirmed their high level of interest at the first meeting. this firm\u2019s internal policy was to maintain a revenue ratio of $1.5 million per equity partner. therefore, only two of the four seller\u2019s partners would become equity partners. the other two would become non-equity partners. the silence was palpable.<\/p>\n the buyer went on to say: \u201ci see you are disappointed that only two will become equity partners. let me see if i can ease your distress. first, we will write you a $3 million check immediately for your clients. last year, our equity partners averaged $800,000. our non-equity partners averaged $400,000. we can\u2019t guarantee that the two of you who will be non-equity partners will make $400,000 in the first year or two. but we are<\/strong> confident that our management model will make your firm way more profitable that it is today. and by the way, we have one partner meeting a year, so even the two equity partners will have virtually no involvement in firm governance. we want our line partners to focus on their clients, growth and developing staff. that\u2019s it. do you still feel disappointed?\u201d<\/p>\n make sure you’re looking at the big picture.<\/strong>
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\npartner agreements<\/strong> govern the firm as it currently exists. the firm\u2019s partners are expected to adhere to all provisions of the agreement. when a firm adds partners via internal promotions or mergers, the new partners are expected to adhere to the firm\u2019s existing partner agreement.<\/p>\nprovisions in the buyer\u2019s partner agreement that may be a problem for sellers<\/h3>\n
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sellers: don\u2019t get hung up on titles<\/h3>\n
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\nby marc rosenberg<\/em><\/p>\n","protected":false},"author":1339,"featured_media":52068,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","footnotes":""},"categories":[2371,3120,2266],"tags":[],"class_list":["post-55459","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mergers-acquisitions","category-pro-member-exclusive","category-partner"],"acf":[],"yoast_head":"\n