Mergers and acquisitions  

Advisers without DB work 'significantly' more attractive

Advisers without DB work 'significantly' more attractive

Advisers have been told firms with no defined benefit transfers on their books are "significantly more attractive" to buyers on the acquisition trail, although consolidators have found most sellers have activity in this area. 

Speaking at a webinar hosted by merger and acquisitions broker Gunner & Co last week (July 17) David Inglesfield, chief executive at consolidator Independent Wealth Planners, said it was "relatively unusual" to find a seller with no transfer cases.

Mr Inglesfield said: "If you have no defined benefit transfers that makes you significantly more attractive on average to buyers, so it is certainly going to help.

"But the vast majority of firms have done some transfers, but most haven't done very many and if that is the case it is not normally a problem because at the end of the day one can remediate a small number of cases if it comes to it."

The advice boss said in 80 per cent of the defined benefit books IWP considers as part of a sale, there is a "high proportion" of "unclear cases". 

He added: "But in more positive news, very often these can be brought to a suitable standard because there is nothing fundamentally wrong with the advice but instead there is insufficient documentation or detail on the file.

"So depending on how many transfers there are in total, one option is to go through the exercise of bringing them up to a required standard - but clearly there comes a point if there are a large number of cases where that may not be practical or attractive." 

It comes as introducer Gunner & Co predicted the number of advisers looking to sell their businesses could spike next year in the wake of the coronavirus pandemic. 

Whilst some advice firms stepped back from the acquisition trail when the virus took hold of the economy earlier this year, others continued with their pipeline of deals undeterred by market volatility.

Also speaking at the Gunner & Co webinar last week Gordon Kerr, mergers and acquisition director at Ascot Lloyd, said the consolidator did not have a "specific number" of defined benefit cases it looks for in a seller. 

Mr Kerr said: "It is very much a case-by-case situation. Some of the firms we have looked at have had all their defined benefit files reviewed externally by pension specialists and that obviously puts them in a much stronger position. 

"It is fair to say if there were a number of transfers we would prefer to look at an asset purchase rather than a share purchase, just to obviously protect ourselves on the potential liability on those cases and given the FCA's ongoing focus in the area." 

Mr Kerr said Ascot Lloyd had honoured all its acquisition deals since the outbreak of the coronavirus pandemic earlier this year and since agreed heads of terms on new agreements. 

A share purchase sees a buyer take over a company alongside all its assets but also liabilities, whereas an asset purchase "cherry picks" just the assets - leaving the seller with the limited company.