Case Study: Taking Your Team and Setting Up On Your Own
Armstrong Watson was engaged by a head of practice area who was keen to take his existing team and clients from his current multi-partner firm to create his own sole practice. We were therefore engaged to value his current position in isolation, negotiate an exit value, incorporate a new entity, register the new entity with the SRA, establish lines of financing with bankers and ultimately assist in the ongoing financial compliance of the new business (e.g. in respect to payroll requirements, HMRC etc.).
Challenges
It can be difficult to deal with the unexpected exit of any partner, but especially one going to compete against the original firm.
It can also be time consuming and labour intensive to set up any new business, but especially one operating in a regulated environment. We helped complete SRA registration forms, guided our client on what was required in their business plan and assisting with financial forecasting.
Finally the banks, understandably, struggled to understand how to treat the business. It was a new start-up on paper (and therefore very risky) yet at the same time came with multiple years of trading history. They needed our assistance in looking at the forecasts and establishing how much lending to give – at a level that protected them but allowed the new business to “carry on where it left off”.
What we did
We produced various valuations, as well as considerable narrative to illustrate the most equitable way to split the existing firm. At the time of writing, this valuation is being disputed and we look forward to the opportunity to explain our assessment and professional judgements to the mediator or the court.
We utilised our experience and contacts within HMRC, Companies House and the SRA to have the new company fully registered and ready to go inside six weeks. Allowing the team to move from old firm to new firm with very minimal disruption.
Our strong relationships with various banking teams allowed us to present our clients case with impartiality and explain in detail how this opportunity was unusual, but not as risky as it might appear on paper. Ultimately, several banks were interested and our client has received sufficient overdraft to cover working capital for the first 12 months.
Results
The new business goes from strength to strength and has finally allowed the partner concerned the freedom to operate how he wants, and with the potential of a significant “payday” from his old firm yet to come.
