Based on his observations from facilitating meetings between buyers and sellers, David Tait highlights the 15 key elements that will help you prepare your adviser business for acquisition.

    While touring the UK and meeting with advisers, I have been pleasantly surprised as well as flabbergasted at the level of preparation in the period leading up to an adviser deciding to start the process of selling the business. A fully ‘prepared for sale’ business can make or break not just the valuation and offer but whether a buyer does or doesn’t proceed.

    Here are the 15 points you should consider around preparing your business for sale:

    1) When should you start preparing?

    The most prepared firms I have met began the process at least two years before discussions with prospective buyers began.

    2) Why are you selling or making an exit?

    Understanding your emotional motivators will keep you focussed. Attempt to understand what you will do post exit and what your world will look like.

    3) Make sure you can articulate your client proposition and your business

    You should be able to give a short and sharp explanation of your journey to date, your firm’s USPs and your preferred outcome.

    4) Improve efficiency, cut out unnecessary costs and improve turnover

    An efficiently-run business with strong turnover will be far more attractive than a business that wastes money.

    5) Increase the levels of recurring income

    Many acquisition strategies and valuations place a huge emphasis on the level of recurring fee income you receive. The most lucrative strategies expect to see business where at least 50 per cent of turnover includes annual recurring income. If your model isn’t there yet, get it there, it will make a huge difference.

    6) Segment your client base

    Everyone has clients who they just love but make very little profit on. Carrying out a thorough client segmentation exercise will not only help you understand where your business is at now, it will also help you adjust your proposition to be more attractive for sale by focussing on quality professional relationships.

    7) Cleanse your client data and get rid of paper records

    There is nothing worse for a potential buyer to be faced with dozens of filing cabinets full of paper client files. Invest in a decent CRM system and go paperless. Client information should be up to date and include current address, phone number, email, client agreed remuneration agreements, holdings etc.

    8) What type of firm or adviser do you want your clients to go to?

    You have worked hard to build up your loyal client following and I am sure you won’t just let them go to the firm that gives you the highest valuation. You know your clients better than anyone and it is crucial for your post exit reputation that your clients are being looked after as well as you have done so.

    9) Understand what the potential buyer is looking to achieve from their purchase

    I like to categorise a purchaser’s needs as follows:

    • horizontal – buying a complementary business that will help them grow
    • vertical – acquisition of an actual supplier or distributor
    • diversification – to move into a new market sector or advice type
    • geographical – a desire to develop or enter a new region

    10) How do you want to get paid?

    A one off lump sum is a common method, however longer-term payments based around a lifetime income could suit you better.

    11) Prepare a sellers pack

    A specially prepared pack outlining your proposition, client make up and key financial information will help you focus on what’s important and will show potential purchasers that you are serious.

    12) Get a sample ‘Sale & Purchase Agreement’

    As you approach closure of a deal, you will be provided with a Sale & Purchase Agreement (SPA). Some SPA’s run to 100 pages and it will help you if you know your way around one of these documents.

    13) Prepare your own due diligence checklist on prospective purchasers

    You need to be absolutely sure of who your potential purchaser is both from an ethical viewpoint as well as a financial point of view. Your due diligence on them is as important as them on you.

    14) Consider the implications of the data protection act

    You can’t and won’t just give potential purchasers unrestricted access to your business data or your client records. Utilise a non-disclosure agreement to ensure your obligations are met under the data protection act and to protect you against data misuse.

    15) Consider the timing

    Your costs for PI, regulatory fees and authorisation are usually paid in advance for 12 months with little or no refunds for cancellation during the year. Know what statutory notice periods you need to give to your network/FCA/insurers.

    The above list should give you some ideas and food for thought. As cheesy as it sounds, if you fail to plan, you plan to fail and that saying is so true when it comes to getting the best from your business sale.

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