The market for adviser businesses is hot right now with numerous deals being done by consolidators, private equity and many other buyers.
You may even be thinking about this yourself with all the problems you are having with Financial Services Compensation Scheme levies, obtaining professional indemnity insurance and defined benefit transfers.
But before you jump, you really need to ask yourself rigorously: 'What exactly do I want to achieve?' This will be a new experience to you and probably the biggest financial decision you will ever make.
It is essential that you get advice or at least speak to people who have been through the process before. There are professionals out there who advise and provide support on sales of adviser businesses – for a fee of course.
To start with, you should consider the following:
- Be clear on what you want out of the deal – do you really know this?
- Be realistic about your expectations, and remember the old adage: ‘You have to leave a profit for the next guy’. You cannot squeeze out every last drop going.
- Try not to get yourself into a position of being a forced seller, for example, because of your inability in obtaining PI cover. A forced seller is always in a weak position.
- A sale will inevitably take time and much more than you expect in order to get a good deal.
- Due diligence will also take a lot of your time and resource – more than you will expect.
The next thing to consider is that you have three parties to consider, all of whom will influence the outcome at some point, for better or for worse, and possibly with major consequences, including jeopardising the whole deal.
These interested parties are yourself, your employees and your clients. Ignore any of these other parties at your peril.
From your own perspective: are you trying to maximise your financial outcome irrespective of the consequences to your employees and clients?
Do you care if your clients are forced into a restricted advice environment with all that means, particularly with respect to the portfolio choices available? As I am sure most advisers will be well aware, you will continue to socialise with many of these people at the golf club for many years to come.
Will your staff be happy working in the new environment and culture that a change of ownership brings? This is a potentially traumatic event for your employees, depending on the type of deal you end up with, and if your employees (and particularly your advisers) are ‘forced' into a restricted environment, they could damage the deal or stop the whole deal in its tracks. There are already some high-profile cases in the press where this has happened.
Your clients will have had a long and highly valued relationship with you, from both sides, and they will be unsettled by the deal, which, to be candid, affects them and their families' financial futures. If not treated well and communicated with very carefully, they may easily look elsewhere and damage any earn-out that will inevitably be involved in a deal of this magnitude.
The options open to you can generally be considered in one of two broad categories.
Be aware that this route will inevitably result in a loss of control, irrespective of what you may think or what the buyer tells you. Do not be lulled into thinking otherwise.
The basic options open to you are to ‘sell and grow’ or ‘sell and go’ (remember that you will not have control whichever way you go).