The IFA mergers and acquisitions market is a busy place at the best of times, but the impending retail distribution review deadline has added an extra element of eventfulness to proceedings.
The vast majority of firms may well be happy to keep calm and carry on, but there is a dissonant band that is unwilling to march into the brave new world and is interpreting the January deadline as an eviction notice rather than the opportunity that most view it as. Of these departees, many will be in advanced negotiations regarding the sale of their business. Those that have not already entered into talks and who do not have the necessary permissions to operate post-January 2013 are leaving it very late indeed and may be compromising the price they are able to realise for their businesses.
Those who have been working on their exit strategy – and this includes those in no desperate hurry to leave the market before January – are likely to have already realised they are essentially faced with two options regarding the sale of their firm. The most obvious is to engage with a national or regional broker group to get the ball rolling. Such organisations will be well versed in the processes behind acquisitions and can steer the vendor through the various stages, although it is important that the selling party is well prepared before any initial meetings. The second option is to offload one’s business directly without the need for a third party who will obviously be taking a cut of the deal. This can be done by speaking with similar firms locally or organisations that vendors may have established relationships with previously to see if they might be interested in an acquisition. There is no harm in advisers looking to sell up giving both routes a try to both get an idea of demand and what kind of price is achievable. Vendors can also keep an eye on the trade press to get an idea of where demand is coming from and through networking at professional events may be able to gauge interest.
Despite the buzz of buying and selling activity, vending advisers may have to think about exactly how they present their business for sale and which parts of it they choose to part with. Offloading the firm lock, stock and barrel may be the preferred option, but, for various reasons, this may not be achievable. One method of sale which seems to be increasing in popularity is selling just the client bank and leaving the rest of the company intact. Whether this is being driven by buyer demand or conscious decisions on behalf of vendors is open to conjecture, but we are witnessing more of this type of sale than used to be the case. Offloading one’s client bank is not simply a case of selling one’s contacts book of course, but an agreement to sell the assets, ongoing revenue and costs associated with the business while unfortunately keeping hold of the liability. This can be negated by the implementation of professional indemnity run-off cover, but still leaves the vendor with a certain amount of responsibility they would not be laden with if they sold the company wholesale. There are also differences in tax procedures between the various methods of disposing with a company, with certain vendors qualifying for breaks such as entrepreneurs’ relief.