The Wrap

TRANSACTION [M&A]NIA (WHAT BUSINESS OWNERS SHOULD KNOW IN 2021)

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While COVID-19 may have negatively impacted many businesses last year, others are ramping up for growth in a big way. And, according to Hanny Akl, “It just seems like the way to grow these days is through M&A.”

Mergers, acquisitions and transaction activity is booming. Business valuations are high, potential tax changes are coming and businesses that have withstood the pandemic are stronger for it. But if you’re a business owner considering an M&A deal in today’s environment, what do you need to know?

In this episode of The Wrap, Hanny Akl, CPA, CFE, CEPA, CVGA and David LeGrand, CPA join our hosts to give business owners the commentary they need to make informed decisions about what their business is worth, where it stands ahead of tax changes and what the future may hold with a transaction.

After listening to this episode, you’ll:

• • Have an understanding of how COVID-19 and the legislation passed as a response to assist companies (such as PPP loans) have impacted M&A
  • Know what part PPP loan forgiveness may play in a transaction
  • Understand how and why the pandemic has positively impacted business valuations
  • Be familiar with the top considerations for business owners looking to pursue a transaction in today’s environment
  • Have an understanding of specific considerations for investors, like carried interest
  • Be aware of potential legislative changes that could impact an M&A deal in the near future
  • Know what tax planning is necessary to protect yourself as a business owner

The Wrap

HOW DO I FILE FOR PPP LOAN FORGIVENESS (AND WHAT CAN MY COMPANY EXPECT)?

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The Paycheck Protection Program (PPP) loans have provided much-needed aid to many businesses since the COVID-19 pandemic began. And while these funds proved to be a game-changer for companies everywhere, the process for applying for and receiving this loan forgiveness is certainly new (and possibly confusing) for everyone.

There are three different types of forgiveness applications, two different covered periods, several different banks with different processes and a handful of new terms to understand. It’s no surprise that the forgiveness process comes with a learning curve for companies, so where do you even start?

In this episode of The Wrap, our guest David Crabtree, CPA, a Warren Averett Member and in-house PPP advisor, joins our hosts to answer the question: How do I file for PPP loan forgiveness, and what can my company expect?

After listening to this episode, you’ll be able to:

• Know when your company should file for PPP loan forgiveness
• Know how long after you submit your application you can expect to receive loan forgiveness
• Understand the three different types of PPP loan forgiveness applications (and know which one applies to your company)
• Know the difference between two important terms when it comes to PPP forgiveness (your number of employees vs. your full-time equivalent)
• Understand how full-time equivalent is calculated
• Know how your company’s headcount at the end of the covered period (or at the time of your application) affects your PPP loan
• Know which covered period (8 weeks vs. 24 weeks) should be used when you complete your forgiveness application

Recommended Resources for Additional Learning

• PPP Update: Borrowers are Not Allowed to Deduct PPP Expenses if Forgiveness is Expected
• SBA Announces Loan Necessity Questionnaire for Borrowers with PPP Loans of $2 Million or Greater
• Warren Averett’s COVID-19 Resource Page

This episode was recorded on November 20, 2020 and reflects our views at the time it was recorded. Information within should be used as reference only. We recommend that you talk to your Warren Averett advisor, or another business advisor, for the most current information or for guidance specific to your organization.

The Wrap

HOW CAN MY COMPANY OFFER EQUITY-BASED COMPENSATION (PROFITS INTEREST GRANTS AND UNQUALIFIED STOCK OPTIONS)?

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It’s important to incentivize your key workers, and there are clear business advantages to offering equity-based compensation to key employees.

Many businesses choose to reward team members in the form of partnership profits interest grants or through nonqualified stock options, but it’s important to understand what you’re getting—and what you’re giving up. Not to mention, you’ll need to comply with specific IRS regulations and understand the tax implications.

Where do you even start?

In this episode of The Wrap, Clint Freeman, CPA and Michael Andrews, CPA, ABV join our hosts to answer the question: How can my company offer equity-based compensation? (What are profits interest grants and stock options?)

After listening to this episode, you’ll be able to:

• Understand what stock options and a profits interest grants are (and the difference between them)
• Be familiar with examples of how profits interest grants and stock options both work
• Know the difference between vested and unvested interests
• Understand what both mean for your taxes

Recommended resources for additional learning:

• Profits Interest Grants: What are They and What do they Mean for Your Taxes?

The Wrap

THE CARES ACT: WHAT ARE PROVIDER RELIEF FUNDS?

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Since the CARES Act was passed earlier this year, one of its programs, the Paycheck Protection Program (PPP), has received the most attention, but it certainly isn’t the only form of relief that the federal government provided in the pandemic.

Less likely to show up in your Facebook news feed and farther away from the spotlight (but just as important), is the Provider Relief Fund, which was created to provide funding to healthcare service providers impacted by the pandemic.

While this aid provides some much-needed relief to healthcare providers, the funding received could trigger some additional reporting requirements that healthcare providers may not have been subject to in the past.

So, what does that mean for organizations that received these funds?

Our guest, Carol Phillips, CPA, CFE, joins our hosts in this episode of The Wrap to discuss what healthcare providers should know about the Provider Relief Fund and what they can expect when it comes to the audits and reporting requirements that will ensue.

After listening to this episode, you’ll be able to:

• Have a basic knowledge of the Provider Relief Fund and how it’s outlined in the CARES Act
• Understand reporting and audit requirements related to these funds
• Know the difference between Single Audits for nonprofit entities and for-profit entities
• Understand how Single Audits are different than other financial statement audits
• Anticipate how to prepare for this kind of audit if your organization has never had one before

The Wrap

WHY IS SOC REPORTING IMPORTANT TO SERVICE PROVIDER BUSINESSES?

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As cybercrime increases in its frequency and severity, companies must be more intentional to protect themselves and their customers. Gone are the days when only the big, nationally-recognizable companies are the only targets for data breaches. These days, companies of all sizes and in all industries need to take action.

So, if your customers have asked you for a report about your company’s internal controls (your SOC) and you thought they were talking about your footwear (your socks), this episode is for you.

System and Organization Controls (SOC) reports are becoming a necessity for many organizations as they strive to protect their data and instill trust in their customers, but it can be difficult to really get a grasp on what your company needs and what you can expect. How do you know what you need? Why does it matter at all?

In this episode of The Wrap, special guests Angie Akerman, CISA and Justin Headley, CISSP, CISA join our hosts to answer the question: Why is SOC reporting important to service providers?

After listening to this episode, you’ll be able to:

• Know what a SOC Report is and why a company would need one
• Understand the differences between SOC 1 and SOC 2, as well as Type 1 and Type 2 Reports
• Have an idea of which report your business might need, or if you might need both
• Know what businesses can expect during and after a SOC examination

Recommended resources for additional learning

• SOC Reports Explained: Building Trust in the Services You Provide
• Which SOC Report is Right for Your Organization?
• Why Should You Know the Risks of Others? [Six Steps for Implementing a Vendor Management Strategy]

The Wrap

HOW CAN MY COMPANY NAVIGATE THE NEW CHALLENGES OF LEASE ACCOUNTING?

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If your company has a lease, this one goes out to you. Did you know that a new accounting standard (ASC 842) requires that companies recognize their leases on their balance sheets?

If you’re thinking this sounds like something you’ve heard before, you’re probably right. The deadline for companies to comply has been deferred twice now. As our guest, Josh says, “We’ve been talking about leases for a long time—seems like since dirt was being made.”

But, now, companies are drawing closer to the deadline for implementing this change, which will give their financial statements a pretty significant makeover. Some contracts may even need to be recognized as leases, depending on the agreement within.

Our guest, Joshua Bowen, CPA, CGMA, CAMS, joins our hosts to dig into what ASC 842 means for companies.

After this podcast episode, you’ll be able to:

• Understand how the new accounting standard concerning leases impacts your company’s financial statements
• Have an idea of how COVID-19 has impacted real estate and the implementation of this new standard concerning leases
• Know how long your company has to implement the standard when it comes to your financial statements
• Identify the challenging areas your business should be aware of in accounting for leases
• Have a basic understanding of how companies should approach implementation and the tips that can set you up to implement the standard well

Recommended resources for additional learning:

• What Companies Should Know About the New Lease Accounting Standards [An Overview of ASC 842, Potential Challenges and Tips for Implementation]

The Wrap

GRAVY SOLUTIONS

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“Great leaders love chaos.”

Casey Graham, CEO and Co-Founder of Gravy Solutions, is no doubt one of those leaders.

For him, navigating the COVID-19 pandemic meant much more than leading a business through uncertainty. It meant supporting his team and seizing the chaos for what would become opportunity.

In February, the company was set to lose nearly $600,000 in the span of four short weeks, and up until recently, Graham says, “Nobody knew Gravy existed. Like, nobody.”

A self-proclaimed “people company,” Gravy used the COVID-19 pandemic as an opportunity to be generous to their team members, share more about who they are, and broadcast the vision for their company. And things took off.

In this episode of The Wrap, Casey Graham joins our hosts to explain how he and his company navigated and will continue to navigate the COVID-19 pandemic, share the story of his “desert season” as an entrepreneur, convey his approach to leadership and offer advice to other businesses leaders looking to make the most of their roles.

The Wrap

LUKE'S LOBSTER

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“I don’t think there will ever be a month—a two-month period—that was ever as hard for me to manage a team, a business, a group of friends, as that March and April period. It was brutal.”

Unfortunately, for many businesses operating in the restaurant, franchise and hospitality industries, “brutal” is a word that has been used increasingly to describe the effects of COVID-19 on their companies earlier this year.

Yet, as restaurants and hospitality organizations pivot and adapt to changing consumer demands and new public health guidance, many have found new ways to empower their people and grow their brands.

Such is the case with Luke’s Lobster, a company with an international network of franchise locations, as well as a manufacturing component that provides seafood products to grocery stores.

So, how does an international franchise adapt to a global pandemic? How do restaurants solve for their pain points in an ever-changing environment? What can other companies—in this industry and others—learn from the Luke’s Lobster story of navigating COVID-19?

Luke Holden, CEO of Luke’s Lobster, says, “I asked my teammates, my family members and friends…to make some pretty crazy concessions as a result of COVID.”

In this episode of The Wrap, Luke and CFO Steve Song elaborate on those concessions and dive into the story of how the company has fared in recent months. Warren Averett’s own Charles Bailey, CPA, also joins our hosts to weigh in on what other companies operating in the retail and consumer spaces can glean from this business’s story.