Maximising the attractiveness of your firm ahead of sale

The full list is much longer. There may also be a substantial piece of work to be done to ensure all the necessary paperwork is up to date and in order. This would include accounts, business plans and strategy, distribution arrangements, client segmentation, client records, compliance documentation and governance processes.

Any acquiring business would likely examine the segmented list of the clients it is taking on board to better understand the quality and stability of client relationships and to check the company is not too dependent on a particular demographic or a handful of big clients. 

The sheer volume of preparation that might be needed could be a deterrent. But the planning process would ideally begin at least a couple of years before the sale. This gives the business time to fully consider and consult on its objectives, putting it in a better position to make good decisions when potential acquirers appear on the scene. 

Get your practice management systems into shape

Bear in mind too that the process of preparing the business for sale may well highlight issues that need addressing. This could range from improving the physical property of the business to enhancing the efficiency of the technology ecosystem.

Would-be buyers will invariably want to see certain data as part of their due diligence process. The extent to which a firm has a technology system embedded into the business to help manage its practice management processes is seen by acquirers as a useful marker to evidence audit trails and compliance reporting. 

A firm’s ability to deliver consistent, compliant outcomes through effective use of technology is a vital part of the acquisition due diligence process. If the buying firm believes it needs to make significant changes to advice processes or ongoing client relationships, for instance, it may want that work reflected in the price paid. 

Acquirers expect firms to hold up-to-date information from board minutes and governance documents, to management accounts and client segmentation processes.

They will also take an interest in how clean the data is, especially if they would be looking to migrate data in the most timely and cost-efficient manner further down the line. Any incomplete data, or issues in being able to access and/or provide that information, would inevitably affect their view of the business. 

Speaking at the recent Intelliflo Connected conference, Roderic Rennison, of Catalyst Partners, used the example of incomplete defined benefit pension transfer information.

He said: “I've been dealing with a business where, partly because of lockdown, partly because of other issues, the information on the DB transfers wasn't available for up to three months and the buyer lost confidence in that period. And that affected: A) the outcome and B) the value.”