In this blog, we’ll be covering what challenges buyers completing multiple acquisitions face. This will be relevant for those looking to complete multiple deals whether the acquiring firm is an established SME, larger consolidator or new entrants coming into the market.
Those looking to complete deals can face challenges for many different reasons, whether that be due to the sheer volume of transactions they’re looking to progress at once or the pressures that can come from a slightly more robust approach such as private equity money.
The following blog was taken from our upcoming video “Top tips when acquiring an IFA Business”
- Clients leaving
Challenge: One unfortunate and often uncontrollable aspect of IFA Acquisitions is clients leaving. Ultimately, some clients may jump ship as soon as they hear the word ‘acquisition’ out of fear, leading to disinvestment or transfer to another IFA of their own choice. This would result in less clients being retained and reducing overall FuM and recurring income causing a lower net consideration price after adjustments are made. Thus, ultimately less money for the seller but equally not an ideal situation for the acquirer who were expecting to acquire the whole of the business including the full value of recurring income.
How to overcome this: Timing with these situations is really important, so it is key that you have a clear strategy of who you are going to tell and when you tell them, so that there are no nasty surprises to clients and staff when it comes to the sale. We have a ‘free to download’ eBook on this topic called “How to not lose clients during an acquisition” which contains lots of useful information suitable for prospective buyers and sellers.
- Alignment
Challenge: Alignment of investments, service proposition and ongoing charges is another key point for those looking to sell or buy IFA businesses, Gary Venner Managing Director of IFA Acquisitions said on this topic “We would look at the centralised investment proposition and servicing processes involved with the purchaser and particularly any time frame in terms of alignment with the sellers own model. So, if there are going to be sudden changes, before building strong relationships with acquired clients there’s going to be less attraction by vendors to want to agree a deal with these acquirers”
Having cultural alignment and compatible targets around various timelines, integration and investment mandates between acquirers and sellers is key. Success rate is far greater when there is in aligned culture in terms of company ethos, staff, and types of client demographic. Being clear from the beginning by fleshing out the expectations is paramount for a successful deal and these areas should be covered in the high-level detail as set out in the heads of terms. Getting this set out should avoid surprises when the actual sale and purchase agreement is drawn up and prevent bigger problems in the latter stages of an acquisition.
How to overcome this: Speaking with a broker who has a comprehensive understanding of working with a wide range of acquirers and sellers is the only true way to understand alignment. Also, working with your broker throughout the end-to-end process until the deal completes will offer an invaluable resource as brokers should have open dialogue with both parties. This is covered on our YouTube channel:
- Narrowing the market
Challenge: Another point that many acquirers do without even realising is narrowing the market. In an ideal world we aim for all deals to be perfect and fit your needs to a tee and run smoothly from introduction to heads of terms / SPA. Unfortunately, this is not always the case and compromises are sometimes needed. One example Gary explained “If an acquirer is looking for an average client holding, say of £200,000 to £250,000 then we wouldn’t have a problem delivering multiple vendors for them. However, if that is increased to around £500,000+ then that really does narrow the market”
How to overcome this: Our advice here would be to keep an open mind and have a good open dialogue with your broker. They ultimately want the best deal for you and the seller, so knowing what you like and don’t like and the grey area in between is a necessity for a good dialogue and will save a lot of time throughout the process.
Conclusion
- Introduction to our experts
- What can sellers do to prepare for a sale Check out the video here
- 3 challenges buyers completing multiple acquisitions face Check out the video here
- Has increased regulation affected demand for IFA Acquisitions? Check out the video here
- How DB pension transfers impact retiring IFAs Check out the video here
- How FCA turnaround times are impacting deals Check out the video here
- 3 Common misconceptions when selling an IFA business Check out the video here
- What solicitor should you use for IFA Acquisitions? Check out the video here
- Legal stages in an IFA Acquisition Check out the video here
- Share sale vs asset sale Check out the video here
- Types of restrictive covenants vendors can expect Check out the video here
- Contracts in IFA Acquisitions Check out the video here
- Lawyer’s top tips for Acquirers Check out the video here
- Lawyer’s top tips for Sellers Check out the video here
- How important is broker involvement for a smooth transaction? Check out the video here
For more information contact us today for a free confidential chat:
Tel: 0208 0044 162
Email: [email protected]