Thirty firms have signed up to Verbatim Asset Management’s merger and acquisition support service launched just five weeks ago.
It is offered as part of the company’s wider business consultancy service, which helps advisers build a central investment process based on planning tools, client management systems, investment solutions and tax wrappers and platforms.
When a firm signs up to the service, Verbatim carries out a fact find on them, identifies the firm directors’ intentions for the business, whether they are looking to buy or sell, and any internal succession planning.
An anonymised profile of the firm is then added to the “common marketplace” and buyers and sellers can see which firms they might want to enter into merger and acquisition discussions with.
Verbatim makes the introductions and offers project management support for both buyers and sellers.
The “common currency” of the Verbatim supply chain is used to help match firms – a common approach to risk, asset allocation, suitable investment selection, efficient use of platforms and comprehensive client management on an efficient back office system helps to reduce the barriers to successful M&A activity.
According to Verbatim, the service is an alternative for firms who want to realise their growth or exit strategy without having to succumb to the often poor deals on offer from consolidators.
Dan Russell, managing director of Verbatim, said: “Deals are often good for the consolidator, bad for the selling adviser and even worse for their clients.”
He said it was important that businesses demonstrate why they use the funds, managers and discretionary portfolios that they do, and how these logically link to the advice they have given the client.
He said Verbatim would also ask about the link of suitability between investment and advice, the location of client information and efficiency of the back office.
Mr Russell said: “It is the car analogy. Which car is going to be worth more? The one with a partial service history, or the one with a full service history and 50-point manufacturer health check. The same applies to an advisory business.”
Tony Catt, an independent adviser compliance consultant, said: “Sounds like a great service. A lot of advisers carry on with their practice not thinking about having any exit strategies. This would appear to be a very good way of entering that process.
“Somebody else providing a central investment process would be useful to advisers as the due diligence required to do that would be quite onerous for the firm.
“In order to have something sellable, this is where the central investment comes in. If somebody were to sell their practice at the moment, they might be selling a filing cabinet full of names and addresses, whereas this way, the buyer would be taking over a running investment and would make money immediately.
“That has a major effect in that buying more ongoing income is the upward spiral of being able to bring in more income.”