070917_KPGHL_Annual Report 2017_final_PREVIEW

Structure
Kelly+Partners has developed an owner-driver Operating Business model within the accounting sector.
This structure has been successful in other industries in Australia, most notably insurance brokers (eg. Steadfast and
Austbrokers). The majority of the Operating Businesses are structured as Partnerships (with the exception of Kelly
Partners Sydney CBD and Kelly Partners Hong Kong), with a wholly-owned subsidiary of the Company holding the
Partnership interest. Each Partnership is governed by partnership agreement, the key elements of which include:
+ majority control position for the Company through >50% ownership interest in each Operating Business (excluding
Kelly Partners Oran Park);
+ 10 year Partnership Term with automatic roll-over for a further 10 years, which generates long-term strategic
alignment of individual Operating Business Owners and the Company (with the exception of Kelly Partners Sydney
CBD and Kelly Partners Hong Kong which are structured as companies);
+ the Company provides centralised management and back-office services for a fixed percentage fee based
on revenue;
+ the Company provides centralised brand, marketing, systems, procedures, and intellectual property for a fixed
percentage fee based on revenue;
+ agreed operating methods and financial metrics;
+ defined monthly distributions or dividends;
+ clear succession plan for older Operating Business Owners, with pre-agreed structures to facilitate proactivelymanaged
generational change;
+ consideration to comprise mix of upfront and deferred (earn-out); and
+ all debt secured against individual Operating Business, both jointly and severally, with no recourse back to
the Company.
For Operating Businesses which are structured as Partnerships, a company ("Agent Company") is incorporated to act as
the undisclosed agent for the Partnership, and enters into contracts including leases for and on behalf of the Partnership.
An exception to the Partnership structure is the Operating Business located in the Sydney CBD, which is structured as
a company (Kelly Partners (Sydney) Pty Ltd ACN 616 117 634) and the Operating Business located in Hong Kong, which
is also structured as a company (Kelly Partners Management Services (Hong Kong) Limited). A wholly-owned subsidiary
of the Company holds a >50% shareholding interest in Kelly Partners (Sydney) Pty Ltd and Kelly Partners Management
Services (Hong Kong) Limited).
The terms of the shareholders agreement which governs the relationship between the Company's Subsidiary and the
Operating Business Owners of the Operating Businesses located in the Sydney CBD and Hong Kong are substantially the
same as the Partnership Agreements set out above (other than the 10 year term, which does not apply to the company
structure).
The Operating Business model provides both retention and alignment of Operating Business Owners and staff in each
individual business. While the Operating Business Owners in each Operating Business are responsible for the day-to-day
management of the business, the Company has the ability to monitor and manage each Operating Business through
collection of monthly data and assessment against performance benchmarks and pre-determined budgets. In addition,
the Company assists to drive operating efficiencies through a common back office platform, which centralises key
functions such as finance, technology, marketing, human resources, and administration.
Business Overview
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