Understanding How Dealmakers Navigate the Trade-offs Between Value and Structure

Mergers and acquisitions (M&A) remain one of the most powerful — and complex — growth strategies in financial services. While price often commands centre stage, seasoned dealmakers understand that terms quietly define the real value of a transaction. Growth Focus unpacks the interplay between price and terms, the inherent risks for buyers and sellers, and how to structure deals that balance ambition with prudence.

The Appeal of Growth by Acquisition

For many financial planning and accounting firm owners, organic growth is a long and incremental path.
Acquisition offers a more immediate alternative: scale in months, not years. The allure is clear — rapid market share expansion, diversified service offerings, and enhanced competitive positioning.

When executed well, acquisitions deliver tangible benefits:

• Instant market presence
  
  
• Broadened capabilities
  
  
• Improved enterprise value
  
  
• Economies of scale
  
  
• Enhanced client proposition
  
  

However, success relies not on the price alone but on the structure that supports it.

Price: The Headline Number That Commands Attention

Price is the first — and often loudest — focus in any transaction.
For sellers, it’s a tangible validation of their business journey. For buyers, it frames investment expectations and future return models.

Yet, price in isolation is incomplete.

Two deals at identical prices can have vastly different financial outcomes, depending on payment terms, risk allocation, and post-sale obligations.
Fixating solely on price risks overlooking structural nuances that define the real-world success of the deal.

Terms: The Quiet Architect of Deal Success

If price is the headline, terms are the fine print that quietly shape risk and reward.
Key terms determine how and when value is realised, and under what conditions.

Considerations include:

• Payment structure: Upfront versus deferred, instalments, or earn-outs.
  
  
• Risk allocation: Who shoulders which risks, and for how long?
  
  
• Security and guarantees: Buyer protections and seller assurances.
  
  
• Non-compete obligations: Safeguards to protect goodwill post-sale.
  
  
• Transition commitments: Seller’s role in ensuring client and staff continuity.
  
  

A seemingly attractive price can be undermined by onerous terms, while well-crafted terms can unlock deal success even at a moderate price point.

Buyer’s Risk vs Seller’s Risk: The Dual Lens

Every transaction carries risk — but the nature of that risk differs sharply between buyer and seller.

Buyers’ Risk:
A poorly structured deal can leave buyers financially exposed if clients fail to transition as expected.
It is easy to overestimate client loyalty, especially when relationships have been forged over years with the seller. Without a well-planned handover, clients may drift, seek alternatives, or — if the seller remains visible in the industry — quietly return to familiar ground.

Sellers’ Risk:
While sellers understandably seek to maximise their payout, aggressive terms like clawbacks or heavy earn-out dependencies expose them to penalties if client retention falls short. Overpromising retention rates to secure a better headline price risks reducing the final realised value and compromising their legacy if transition support is inadequate.

Buying Relationships: The True Asset in Practice Acquisition

Clients don’t just buy financial advice; they buy relationships.
This truth sits at the heart of every practice acquisition. Buyers must recognise that acquiring a client book is not the same as securing client loyalty. Trust needs to be transferred as deliberately as assets.

Sellers play a pivotal role here.
A structured transition period, joint client meetings, and clear, honest communication about the change of ownership dramatically reduce the risk of client flight. Clients need to feel not just informed but confident about what comes next.

Client Portability:
Clients are mobile. If they sense instability, they will leave. If they feel overlooked, they will move. And in some cases, they may even circle back to the seller if the transition is poorly managed.

Mitigating Client Flight Risk:
Early, well-planned client engagement and visible alignment between buyer and seller help retain clients through the transition. This is where terms and price interlink: even a premium price can be justified if backed by robust transition support that preserves long-term value.

Second Installments and Clawbacks: Deal Makers or Breakers?

Deferred payments and clawback clauses are common mechanisms to balance these risks — but they must be carefully negotiated.

• Second Instalments:
  Typically tied to client retention or revenue milestones, second payments ensure sellers remain invested in transition success. However, if retention targets are poorly calibrated, they can lead to tension or disappointment on both sides.
  
  
• Clawback Clauses:
  Designed to protect buyers, clawbacks allow for recovery of payments if clients leave post-sale. Yet disputes often arise if departures result from factors beyond the seller’s control — market dynamics, buyer integration missteps, or personal circumstances of clients.
  
  
• Money Left on the Table:
  Sellers sometimes accept a lower upfront payment in exchange for the potential upside of an earn-out, only to see that upside evaporate due to retention shortfalls. In hindsight, the balance between upfront certainty and deferred risk is a critical negotiation point.
  
  

A well-structured deal acknowledges these risks and allocates them fairly, ensuring that both parties remain aligned throughout the transition.

A Cautionary Case Study: The Million-Dollar Mistake

John, a seasoned financial planner, was preparing to exit his practice after decades of steady success. Eager to maximise his payout, he negotiated hard for a higher upfront price and, to close the gap with the buyer, Lisa, agreed to an aggressive clawback provision tied to client retention.

On paper, the deal looked well-balanced.
However, within six months of completion, cracks began to appear.

Key clients, whose loyalty had been anchored to John personally, started to leave. Despite Lisa’s expertise and good intentions, the transition had been rushed, and there was no structured handover to build new rapport. Clients, uncertain of Lisa’s style and approach, either moved their accounts elsewhere or quietly followed John, who still maintained a passive presence in the industry.

As retention numbers fell below the agreed thresholds, the clawback provision triggered. John, who had celebrated a high headline sale price, was forced to refund a substantial portion of the proceeds. Lisa, meanwhile, found herself having overpaid for a shrinking client book, facing both financial pressure and reputational risk.

The result?
What began as a seemingly fair deal — high price, strong buyer protections — ended as a lose-lose scenario.
Without realistic retention expectations and a carefully managed transition, both parties absorbed more risk than they had anticipated.

The Interplay: Where Real Deal Value Lives

Price and terms are not independent variables; they work in tandem.

For example:

• A premium price can be justified if the seller offers supportive terms, such as longer transition involvement or performance-based earn-outs.
  
  
• Buyers may accept a higher price if terms provide meaningful protections against risk.
  
  
• Thoughtful use of deferred payments bridges valuation gaps while keeping both parties motivated.
  
  

At Growth Focus, our work across both Australia and the UK gives us a clear view of how this price–terms balance plays out differently in each market.

In Australia, we see generally lower headline multiples, but deal terms are often tighter, with shorter timeframes for second and subsequent payments. Buyers prioritise faster resolution of risk and quicker consolidation post-transaction.

In contrast, in the UK, transactions typically carry higher multiples, but payment terms are drawn out over longer periods. Buyers in this market are prepared to pay a premium for quality businesses, provided they can spread their risk exposure through extended earn-outs and staged payments.

Both approaches illustrate the same fundamental principle: the balance between price and terms is not fixed — it flexes with market expectations and risk appetites.
Neither is inherently better; they simply reflect different ways of managing the trade-off between immediate cash flow and longer-term security.

Sophisticated negotiations recognise that real value lies not in the price alone, but in the careful equilibrium between immediate reward and future security.

Deeper Considerations: Beyond the Numbers

While financial metrics are critical, M&A in professional services is ultimately about people.
Clients value stability. Their perception of the transition — not just the price paid — will dictate whether they stay or leave. Poorly communicated transitions or misaligned firm cultures can undermine even the most carefully structured deals.

Further, regulatory scrutiny, compliance integration, and cultural compatibility between merging firms play pivotal roles in post-deal success. A well-structured deal aligns incentives, ensures client confidence, and lays the foundation for long-term value creation for both buyer and seller.

Closing Thought

Price and terms are not competing forces — they are complementary levers.
Great deals achieve harmony between the two, balancing ambition with realism, and optimism with protection.

Sellers must remember: an ambitious price unsupported by reasonable terms risks collapse.
Buyers should appreciate: protective terms can justify higher price points, if they genuinely mitigate post-transaction risk.

The art lies in structuring a deal where both parties can live comfortably with the risks they carry, while sharing in the upside they create.

👉 Looking for more insights on structuring the perfect deal that aligns with your long-term objectives and preserves business value? Contact Growth Focus today for expert guidance on achieving the right balance between price and terms.