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Do your homework before selling firms

DAVID HESKETH, GROUP M&A MANAGER, PERSPECTIVE FINANCIAL GROUP
DAVID HESKETH, GROUP M&A MANAGER, PERSPECTIVE FINANCIAL GROUP

In a recent article about IFA firms’ exit strategies and the best time to buy or sell it was said IFAs should beware sharks in the water.

The suggestion was that ’desperate’ firms were sending out the wrong message and they would find themselves at the tail-end of a particularly poor deal.

I disagree mainly because it seems to suggest that all firms looking to secure their exit from the industry pre-Retail Distribution Review were somehow naïve, forced to take an ultra-low offer, and effectively being ripped off by unscrupulous purchasers.

Our experience of purchasing firms and dealing with IFA owners couldn’t be further from the truth.

Owners contemplating becoming vendors should do their homework about their business and those who may purchase it.

Secondly, they should be realistic about the firm’s value. Often the owner’s perceived value is far in excess of what others might consider it to be.

All this leads me to suggest that a significant amount of due diligence should be performed by the owner.

Much like we would perform financial, legal and compliance due diligence on a prospective purchase, so must the vendor on potential purchasers.

There should be complete transparency in such a deal.

Any consolidator or acquisitive firm worth their salt will be willing to share information on the way they work, the way they value, the benefits in being acquired and how they will handle clients post-acquisition.

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