Preparing for sale: building a plan and executing it

However, internal succession through management buyouts and employee ownership trusts may be explored.  

In my experience internal succession is challenging to achieve, and needs planning as early as possible. 

Client proposition: this is where you are likely to have the most ‘red lines’ – operational approaches you either do not believe in or do not think your clients will benefit from.  

Understanding a potential buyer’s client proposition and investment approach allows you to identify synergies and opportunities or conversely anomalies, such as charging structure, passive vs active investment approach, model portfolio vs bespoke, frequency of client meetings etc.  

If you know what you need from a buyer in advance, a good broker can assess how realistic that may be to achieve. 

Understanding the market

Objectives are only truly valuable if they have been externally validated. It is all very well being clear on what you want, but any plan can fall apart if you have not verified that what you want exists or is achievable. 

Buyers come in many shapes and sizes, and no one deal is the same. The positive of that is many things are possible with time and planning, but reviewing your plan with an industry expert annually will identify gaps in the plan.

Ideally you would also get a review of the buyer market at that point too, to get a feel for the type of buyer that may suit you.

Introducing clients’ children into occasional meetings is the sort of thing we recommend as a minimum.

They all have pros and cons and trade-offs. For example, a large national buyer may be less flexible, but has a very clear ability to pay in full. 

And while buyers vary wildly, they are all looking for some core elements. 

What are the core factors attracting buyers?

Client make up

Even looking at multi-adviser, going concern purchases, buyers will value most significantly the underlying client base.  

In an ideal world, buyers are looking for young, engaged clients with large average asset values. The reality is most client books are a mix of old, young, rich and poor. 

However, the larger the average client size, the greater the level of income received per business unit. While acquirers may vary in their desired average client size, the majority of businesses would look for a minimum of £250,000 per household. 

Additionally, while some businesses will specialise in ultra-high net worth clients, many will consider taking on clients at circa £1mn AUM average as too high a risk.

The bigger your business's profit quantum, the more attractive it is likely to be in the market.

Because if they are unable to retain these clients, the financial impact on the deal would be significant.