We often get asked here at IFA Acquisitions what the usual timeline of an IFA Acquisition is and how long it can take from first engagement to final payment. This is the topic of this week’s blog.
Stage 0: Decide you want to retire
Although not necessarily a formal stage in the IFA Acquisitions process, deciding you actually want to retire is a huge question to ask yourself. Knowing what the IFA Acquisitions market can and cannot offer you may help you with this decision.
We covered this in a recent piece of content with leading legal firm Herrington Carmichael ‘3 common misconceptions when selling an IFA business’ these include:
It is important to understand what to expect from an IFA acquisition, and what can get in the way. Two prominent issues in the market that you should be clued up on before engaging in the acquisitions process are DB pension transfers if you have given advice on these and the FCA turnaround times for change of control, where there is a share sale. We recommend you check out the below blogs for more information:
It can also be a great idea to prepare your business for a sale in advance, we’ve also covered ‘What can sellers do to prepare for sale?’ in a separate blog.
Stage 1: Select an IFA Acquisitions Broker
Once you have decided on an appropriate broker you will usually have an initial call with your broker whereby they will learn more about you and your business. This could cover:
- What you’re looking for in the sale?
- Do you have any personal timelines to work towards?
- What factors are important to you?
- Do you want a share sale or an asset sale?
- Details of your business ie, FuM, recurring income, number of clients / households, ages of clients, CIP, service proposition and charging structure etc
- A wide variety of acquirers across the UK
- Links to professional providers such as accountants and legal experts
- A track record of delivering deals for their clients
We have a blog in collaboration with Herrington Carmichael covering “How important is broker involvement for a smooth transaction” that goes into the need for a broker in more detail. At IFA Acquisitions we have hundreds of active acquirers and links to multiple professional providers within the industry. In an effort to provide our current and prospective clients the most value possible we have created a series with the following professional experts:
- Haines Watts (Accountancy)
- Herrington Carmichael (Legal)
- Vertus Capital (Lending)
- HR People Support (HR)
Stage 2: Select an acquirer (1 – 2 weeks)
Using the information gained from stage 1, your broker will then whittle down a list of potential acquirers that could perfectly fit your exit goals.
Here at IFA Acquisitions we have over 100 acquirers nationwide and will use our expertise to create a shortlist of suitable acquirers and during our consultation with you will narrow our recommendations of 1 – 2 options to you, the vendor which are most appropriate, for you, your business and your clients. We feel this is the optimum number as any more can make the process confusing and create a long-winded and unneeded process.
We will then present the propositions to you to get your thoughts and agreement to make the introduction. An important point to note is that we will never submit your details to any acquirer without your explicit permission.
Stage 3: Meet acquirer / acquirers (2 – 4 weeks)
At this point, we will look to set up a meeting of either an initial telephone / video call or a face-to-face meeting where you can meet the acquirer. It can be useful to have a list of questions for the acquirers or topics that you want more detail on, examples can be:
- Understand more about their business / proposition
- What will happen to my clients?
- Will I be needed after post-completion?
Your broker will be involved post-meeting in obtaining feedback from both parties.
Stage 4: Heads of Terms (1 – 4 months)
Additional meetings might be required, but in some cases deals can proceed straight to an offer, which will usually be presented via an offer in principle and then where mutually agreeable will be presented in more detail where Heads of Terms are produced. Heads of Terms aren’t legally binding at this stage, however, they normally include a period of exclusivity to prevent alternative discussions continuing for an agreed timescale. This is because the acquirer will begin to incur legal fees and commit significant time to preparing the deal with costs of completing due diligence. Once the Heads of Terms are agreed and signed, a formal SPA (sales purchase agreement) will be drawn up by the acquirer and once the vendor and their solicitor are happy with it and agreed any changes following the completion of due diligence, they will sign and proceed to completion. At this stage, these are legally binding.
Stage 5: Completion (3 – 12 months)
Once The Asset Purchase Agreement or Share Purchase Agreement has been signed and change of control has been agreed by the FCA where applicable for share purchases of directly authorised firms (usually takes c3months from application) completion of the acquisition is ready to take place. The new acquirer will then usually go and meet the clients with the vendor to conduct handover meetings for a smooth transition of clients. We feel this is an effective way of introducing your clients to the new Financial Advisor / Acquirer. Your clients will have a lot of trust in you, meaning they will find your recommendation reassuring which helps minimise client attrition. In this meeting you as the vendor will promote the new acquirer and explain your reasons for going with them. This gives you the chance to really upsell the acquirer and their services and for the new advisor to get to know your clients and build that rapport right from the off.
Payment 6: Payment (0 – 36 months after completion)
The final stage is the payment! Typical deal terms are 50% of the consideration value paid upfront on completion, 25% at 12 months and 25% at 24 months. Some are over 3 years and some may agree a longer earnout period and occasionally we see deals of less than 2 years. Multiples can vary depending on the length of the deal and also the percentage paid upfront. In some cases this may not be the final involvement you have as a seller – some acquirers will want you to stay on in an Ambassadorial role as part of the purchase price for handovers, some may ask you to stay in in an authorised Adviser capacity with suitable remuneration and occasionally offer you a competitive salary to stay on in an ambassadorial role overseeing the transition of clients.
It is important to know how IFA Acquisitions usually take place so that you can know what to expect during an exit process. No two acquisitions are the same so although this is a typical timeline, the timeframes and processes can vary however hopefully you found it useful. Here at IFA Acquisitions, we really pride ourselves on getting to know you as the vendor and what is really important to you. This helps us guide you through the process as smoothly as possible of what can be a stressful period.
Contact us now to have a free and no-pressure chat about your potential retirement plans and for any more information on the contents of today’s blog.