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Selling your financial planning business – what you need to know

  • By Jason Stockwell

With one in two owners of financial planning firms reportedly considering selling their business, Gunner & Co., the boutique merger and acquisitions broker, has set up a unique service for company owners to fully understand the sale process. Louise Jeffreys, MD of Gunner & Co, gives us a helicopter view of what you could expect to learn from attending one of the seminars that the company is holding around the country – and shares a few practical tips into the bargain


As a specialist broker in the financial planning sector, my colleagues at Gunner and Co. and I work with financial planning business owners to help them identify the right exit opportunities for them – and to then to support the ongoing exit process. As you’d expect, we take into account each business’s individual needs, and also those of its clients and staff. One of the most common lines we hear is “I’m only going to do this once (maybe this sounds familiar to you?), and so I must do it right”. But so often this is swiftly followed with “I don’t know what I don’t know”. It’s a smart observation. As a business ourselves, we are passionate about giving owners as much knowledge as possible when considering the sale of their business – and it was through this channel that our seminars were conceived and born.

I’m pleased to report that we are now four years on. Over that period we have honed the content of the seminars through the feedback we’ve had from hundreds of financial advisers, so that we can ensure that the day covers the right topics as far as those attending are concerned. In this article, I am aiming to give you a flavour of the content we cover, along with some key themes and take-aways.

The changing landscape for advice firms

The seminars kick off with a big-picture, macro-economic presentation, which reviews how the landscape has evolved for adviser businesses over the last thirty years. With adviser numbers dropping by 90% since the 80s, we explore how the profession will be sustained in future, and what that decrease in numbers of both advisers and firms actually means for business valuations.

At a macro level, there are a few key considerations you need to be aware of when preparing for a business sale.

So we come to the question of what sort of buyer would suit you, your team and your clients? We can roughly divide the market opportunities into three:

  • ‘Sell and go’, where you identify a buyer, be it small and midsize local firms or large national consolidators, and sell you business with an effective transition and handover
  • ‘Sell and stay’, where you sell your business but remain on as an employee of the buying firm
  • Or, increasingly popular ‘partnership’ models, where you work alongside a business, start the integration of your clients, and trigger a sale some years later thereby minimising risk

Whichever route you choose, it’s important to understand the key motivators for business buyers. These range from growing the client base and revenue stream, entering new geographic markets and increasing adviser numbers to a growing firm. However, an underlying takeaway from the seminar session is to always question the ‘why’ of the acquirer. It is important that you drill down into it. There are acquirers out there whose stories don’t stack up – and in our experience this question isn’t asked often enough.

Gunner & Co.’s inside tips – what are the deal trends?

My colleague Gwill Evans, lead M&A associate at Gunner & Co., presents an enlightening session on the trends in the M&A sector based on the data and experiences he and Gunner & Co. have had over the years.

Whilst no two deals are ever the same, a business is simply worth what someone is willing to pay for it. In this light, Gwill highlights some recurring themes. The role of a brokerage like Gunner & Co. is to identify buyers who will value what your business has to offer. Looking at a prospective acquisition or merger from the buyer’s perspective is the best way to negotiate an effective solution, allowing you to truly develop a win-win scenario which suits all parties.

Some of the key factors that drive the attractiveness of you to a buyer will include:

  • Your geographic position. All buyers start with geography in terms of proceeding with businesses for sale. That may be because they want to enter a new region or bolt on to existing operations in a specific city.
  • Your average client portfolio size – many buyers have thresholds in this area. Gunner & Co. would be using this key piece of data to shortlist potential buyers.
  • Your investment proposition. Whether you favour passive over active, you run model portfolios or use third-party discretionary managers – this will play a determining part in a buyer’s approach.

Gwill stresses the importance of you being able to articulate detailed information on things like who your clients are, where they reside, how much they have invested with you (and where) and how much they pay you. These are an essential starting point to be deemed credible to a business buyer. And I should also highlight the importance of the use of technology in your business operations too. We have seen many purchase proposals which pass on back office system builds and file scanning to the seller.

Shaking the due diligence tree

An echoing theme is the need for early preparation so our due diligence session is all about this important aspect.

Due diligence takes the form of legal, financial, commercial and regulatory considerations. Often your corporate advisers (lawyers and accountants) will lead the legal and financial aspects, but the commercial and regulatory DD will generally be down to you, or a member of your team.

It makes a lot of sense having one central-point person building a suite of documents which evidences a consistent and coherent client proposition. Of course, your business will need to continue to trade as usual as you go through this process, so minimal distractions across the team is essential. Furthermore, a single person can keep a clear log of what has been provided and what hasn’t been.

Key documents and data you will be asked for during due diligence* include:

  • Segmented client data, including policy numbers, dates of birth and postcodes
  • A detailed overview of all funds under management and advice, where they are managed and how and what you are being paid
  • Board and investment committee minutes.

*Gunner & Co. has a full due diligence preparation pack, contact me for a copy.

Delving further into the technical elements of structuring a deal, we cover the mechanics on the various tax positions for the monies you will ultimately receive on selling your business. This includes details on the qualifying criteria for entrepreneurs’ relief and the structure for sole traders. Corporate accountants are on hand to answer detailed and specific questions in relation to individual businesses and this is something that delegates find particularly useful.

Last but not least, we also cover the legal aspect of any deal. In particular, we talk through the expectations in terms of any ongoing liabilities you may have, the expectations around warranties and indemnities and the differences between asset and share structures.

Taking the time out to give proper and timely consideration to such an important aspect of your business life makes good sense. As the old saying goes “knowledge is power”. When it comes to selling your business, I know from experience that this is certainly true.

If you’d like to know the dates for Gunner & Co.’s 2019 seminar programme, please email me louise.jeffreys@gunnerandco.com or follow us on LinkedIn for updates.


Louise Jeffreys is Managing Director of Gunner & Co. With her extensive leadership experience and expertise in marketing, Louise knows, first-hand, how to position businesses for the best exit.
Louise.Jeffreys@gunnerandco.com

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