The expat IFA mergers and acquisition market is awash with consolidation, much the same as the UK market was a decade ago, writes Brian Spence, director of global advice M&A specialist HSP Consulting.
It can be a daunting time for advisers selling their business. I have written some top tips for any would-be IFA business seller, to help any sale to go smoothly, for the right price and to the right acquirer.
Brokers
Brokers are usually paid by and work for the buyer. A consultant will act on the seller’s behalf and work with the seller to present the business in the best possible light to a broad audience.
Generally, a broker receives a commission paid by the acquiring firm. In other words, the broker is acting on behalf of the buyer, not the vendor. How can an IFA selling practice expect to get a fair deal in such a situation?
Vendors need independent, impartial professional help for what is, after all, one of the most important decisions of their lives. Exclusively engaging a consultant will ensure a fair deal in your interest, not in the interest of the selling agent.
Fees and help
Don’t be afraid of paying a fee: the right independent consultant will always get the best price from a good company that benefits clients, owners, and acquirers alike. Think long-term and pay for a value-adding service.
An independent consultant will normally obtain a better price because the acquirer is not paying anything to a broker.
Acquirers will always seek the lowest price. An experienced consultant will be able to negotiate the best possible deal.
This is one of the most important decisions for IFA business owners and the first time they have in most cases sold a business. Use an experienced firm that will act on your behalf to achieve the best outcome.
Structure of deal
The structure of every deal is as important as the price.
There are many key questions that need to be asked, these include:
- How long must the seller/vendor remain with the company?
- How many shares will they sell initially, and will they retain a majority or minority holding?
- How will the company be valued?
- Does the retiring IFA want to exit the business asap, or do they want to stay with the business going forward?
- Does the vendor want to stay with the new company in a management position or just as a figurehead?
- Does the retiring IFA wish to retire at all, or are they seeking professional help to understand their options better?
Non-disclosure agreements
There will always be bad actors who illicitly share information.
A vendor can be hurt badly if the knowledge of a sale reaches the public domain or gets into the wrong hands; staff and clients can be unsettled, and the firm disrupted.
After all, it is one reason that owners are often reluctant to put their businesses up for sale in the first place.
Prepare your shop window.
One of the roles of an independent consultant is to improve your ‘shop window’.
It may be that your business requires some ‘beautifying’ before it is ready for sale.
Like the property ‘dressers’ that help properties fetch their maximum value, your M&A specialist can be on hand to implement a few judicious touch-ups wherever needed.
Make sure you also leverage the expertise of a good consultant well in advance of a planned sale. They will assist you in making adjustments that will increase the profitability and, therefore, increase your business’s value on an Ebitda (earnings before interest, tax, depreciation, and amortization) basis.
A vendor/seller will always look more professional when using an independent consultant to sell their business. It creates a very positive impression on potential acquirers. It shows that you are a serious player.
Direct approaches
Finally, if an acquirer comes to you directly, do not be tempted to allow them to cut the independent consultant out.
The likely result will be a lower price, a less-than-ideal purchaser, and the wrong infrastructure for your clients.
Good luck on your business sales journey, and I wish you well.
This article was written for International Adviser by Brian Spence, director of global advice M&A specialist HSP Consulting.
