Fishing in the wrong place

The passage of time is working against both buyers and sellers. Yet relatively few deals are being done.

In our experience, the key issue is that most vendors and acquirers are casting their nets wrongly and fishing in the wrong places.

More and more mid-sized and large financial services firms are waking up to the ‘once in a generation’ opportunities being created by the shake-out in the IFA industry.

So why is so little being done? In our experience, the firms who could capitalise on the shake-out fall into one of three camps.

First, those who do not see the opportunity. Second, those who see it but are unsure how to respond, and third those who are beginning to respond but are wrestling with how to develop the right proposition and systems.

There are a growing number of firms in the third camp, many of whom have raised funds specifically to make acquisitions.

Yet despite the available funding, many acquirers remain frustrated. Often they struggle to find available firms to buy. Of those targets that are available, many turn out to be unsuitable, but sometimes only after a lengthy due diligence process. Put another way, acquirers are kissing a lot of frogs who fail to turn into princes.

What can acquirers do? First, they should determine exactly what they are looking for, and communicate it much more clearly. They should make it known that they are in the market for IFA practices, being transparent about the type and size of firms they are seeking to acquire and – equally important – those they are not interested in.

Turning to vendors, many IFAs considering a sale or merger are understandably cautious about making their position known.

When considering a sale, IFAs should be willing to talk and to take time exploring potential interest from regional and national players.

Social networks including LinkedIn, Ecademy and IFA Life can all be useful sources of information and can present avenues worth exploring.

Brian Spence

Harrison Spence Partnership

London