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59% of UK advisers to sell their business in next three years

But only 43% happy to complete a deal with a consolidator

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Nearly six-in-10 (59%) financial planning firms in the UK are looking to be acquired within the next three years, according to research by M&A broker Gunner & Co.

Activity has been steadily increasing within the financial advisory and planning space, as the firm said that diversification of the buying market has led to bigger deal values and a wider pool of buyers showing interest in the sector.

Some 63% of the 103 companies surveyed claimed that succession planning was the main reason for looking to sell their businesses.

Gunner & Co added that entering an M&A deal years before retiring is becoming an ever more popular trend, with 34% wanting to future proof their businesses, followed by 14% seeing it as a longer-term of succession planning, while a similar number would eye the realisation of capital to de-risk their firm.

Louise Jeffreys, managing director of Gunner & Co, said: “With new entrant buyers offering partial equity purchases, growth funding and more autonomy for the selling business – the M&A market is moving away from the dominance of consolidators we saw a few years back.”

Motivated to sell

According to the brokerage firm, the vast majority of financial planning companies in the UK (77%) would prefer an external sale to a management buy-out (10%) or a local merger (8%).

Jeffreys added: “Mergers, management buy-outs and management buy-ins are notoriously hard to execute, despite often being an aspirational preference for business owners. Whilst they can afford the business a level of continuity, a consolidator-style buyer can’t, they are fraught with challenges around identifying the right successors, agreeing the value and fund raising.”

But most businesses wouldn’t want to sell to a consolidator, as only 43% were open to the option, and 35% favourable to entering a deal with a consolidator start up. Many would rather sell to smaller buyers, 67% would consider large regional firms and 55% a small local option.

“The challenge with smaller-scale buyers is their experience in completing deals and their ability to pay – these factors should not be overlooked,” Jeffreys warned.

The price offered for the business seems to be the most important factor for 64% of respondents, followed by an alignment of client proposition (54%), while client charging structure was the least important point to consider (7%).

Jeffreys said: “Given multiples have consistently risen over the last three years, business sellers are more and more satisfied with offers in the market, further fuelling motivations to sell.”

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