Mergers and acquisitions  

What kind of deal are you looking for?

This article is part of
Guide to selling your business

What kind of deal are you looking for?

Selling an advice business that has been built up over many years, or even decades, can be an emotionally challenging but ultimately rewarding process.

Paul Morrish, corporate director at Succession Wealth, says that for the majority of advisers, selling their business will feel like “giving up something very precious, that you have nurtured and grown and formed many vital relationships through.”

Advisers will have many different reasons for deciding it is the right time to sell. In the past, retirement was typically the trigger for most business owners - but that is not necessarily the case nowadays.

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“A few years ago people were largely selling to retire, but recently we have seen advisers actively looking to join forces with bigger firms which offer more resources and investment,” observesVictoria Hicks, acquisitions director at The City and Capital Group.

Rather than focus on deal structure, an adviser owner needs to first think about why they are exiting the business and the outcome they would like to achieve.

David Inglesfield, chief executive of IWP, says he always asks sellers what their personal objectives are, adding: “It’s important to be clear about these to ensure that any deal meets their needs.”

He lists a few questions for advisers to ask themselves:

  • how long do you want to continue working for?
  • do you have any specific price aspirations?
  • how important is continuity in the business post sale?

Need for speed

Simplistically, there are two main types of deal that advisers will have to choose between.

“Remain a part of the business and keep some equity, or opt instead for a quick sale,” explains Simon Goldthorpe, joint executive chairman at the Beaufort Group.

Where time is of the essence, the latter is likely to be the best option. For example, if a business owner falls ill suddenly, forcing them into early retirement, then a quick sale may well be the best and only option for them.

Ms Hicks explains that a quick disposal, sometimes effectively a distressed sale, is usually the last resort when an individual is unable to remain in a business any longer.

“As a result, this is usually an asset sale, rather than a share sale, in order to reduce the length of the due diligence process. But this could have tax implications and you are also likely to receive a much lower purchase price,” she says.

However, a quick sale does not necessarily make it a bad one, according to Mr Morrish.

“If you are well prepared, know what you want, clear on your longer term outcomes, and engage with a proven acquirer, a focussed sale process needn’t take longer than a matter of months,” he says.

Mr Inglesfield adds: “I’d also suggest that a seller wanting a quick sale considers appointing a lawyer experienced in the sector. There are a number of specialist law firms we see frequently acting for sellers, and they tend to be very familiar with the idiosyncrasies of the sector.”