Acquisition hunt accelerates as buyers flock to market

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Acquisition hunt accelerates as buyers flock to market

Tim Harvey, director at HR Independent, said there had been an acceleration in the number of approaches he receives from prospective buyers over the past two to three years.

The advice boss said: “I’m now approached around three to four times a month by firms looking to buy my business.

“The more targeted approaches have used rising costs as a shoe-in to open up the conversation – they just think, ‘Small firm, IFA, things must be going down the drain’.

“They ask if I am fed up with regulatory costs and FSCS bills.”

Mr Harvey said some approaches were quite “in your face”, often telling him they knew his age and urging him to come to an agreement.

But he was not considering selling his business at the moment. Mr Harvey said: “Why would I bother to stop working? I love it, absolutely adore what I do and it affords me a good standard of living.”

Last week FTAdviser reported small advice firms would still have a place in the industry despite rising regulatory costs and dwindling revenue. 

It came as advisers recently warned they will soon be forced to increase their fees to balance the books in the face of ever-increasing regulatory bills and professional indemnity insurance premiums.

But Mr Harvey said he was “deeply suspicious” of consolidators and how they would treat his clients after they were moved across.

He added: “One of the most attractive ways of selling the business would be an ‘earn out’ relationship, where they pay a proportion of your ongoing income for a number of years and the clients are managed across.

“In terms of the numbers and trust, that’s what I would go for.”

This view of the state of the acquisition market has been echoed by Alex Morley, head of SimplyBiz’s recently launched buy-out scheme, Horizon.

Mr Morley told FTAdviser the business, which pairs member businesses looking to sell with those looking to buy, had already seen 100 companies register their interest to sell since the service launched at the beginning of July.

The former Sanlam Wealth Planning boss also said 25 member companies had approached the service as prospective buyers, but Mr Morley was keen to emphasis he did not think the interest was linked to the coronavirus pandemic.

He said: “We have had a lot of positive reaction from both potential buyers and sellers and they are coming in all shapes and sizes.

“I don’t personally think coronavirus is going to suddenly force a lot of people out of the industry – I think we will see a lot of interest in the service because we have an ageing population of advisers.”

Mr Morley added: “We are doing this because we want to retain clients and help grow our member base and make sure both our advisers and their clients get a good deal.

“And to ensure they don’t absentmindedly wander into a vertically integrated national or consolidator and find their clients aren’t getting a continuation of independent advice.”

Louise Jeffreys, managing director at introducer Gunner & Co, said the buy-side market had “long been extremely competitive”, with her company typically having six to 10 credible buyers for each seller.

Ms Jeffreys said: “There has been sustained growth of both buyers looking to emulate consolidators’ quick growth models and ‘buy and build’ investors entering the market.

“Even with this growth in buyers, with around 12,000 firms currently active in the market the buy-sell demand curve could shift.
“We’re already seeing credible, experienced buyers getting more picky in what they will consider.”

While some advice companies 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.

Last month Gunner & Co told FTAdviser the number of advisers looking to sell their businesses could spike next year in the wake of the coronavirus pandemic.

rachel.mortimer@ft.com and imogen.tew@ft.com

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