WHY are our sellers selling?
Why are our sellers selling?
As Simon Sinek once said – “Start With Why” – so that’s what we do!
Why are you thinking about selling your business?
In working with our sellers well in advance of beginning the acquisition project, we dig deep, getting to the source of why they are considering a sale,
ensuring their objectives are fully met.
Here’s a round-up of the top 6 reasons our sellers are seeking an exit, in full or in part…
Still top of the list, although only just – are those working towards retirement. As you approach retirement you want to know your clients are going to be looked after and you will subsequently be financially rewarded for all your hard work during your career. With an exit date in mind, our sellers know that remaining involved post-acquisition to provide a smooth handover and cement those client relationships is fundamental to a successful acquisition.
From preparatory work, to initial meetings, to due diligence and legals; the acquisition process is rarely a quick one. If you are then looking to remain for a handover period, perhaps even the full ‘deferred consideration’ period, keep in mind selling for retirement often takes at least 2 years to fully integrate and receive 100% of your capital.
2. Owners feeling the pressure of running a regulated business
This scenario is becoming increasingly popular for those who are 3-10 years from retirement and feeling the pressures of running a regulated firm, however could also be applicable to any owner at any stage of their journey.
Commonly, these are business owners who desire a capital event now and who still have a passion for offering advice to their company’s clients but without the responsibility and stresses of business ownership. An acquirer often has additional resource and centralised processes which the vendor can benefit from. Once integrated, this process alignment provides a much greater level of service to the client. In summary, these vendors are seeking a capital event, operational continuity and a suitable role post-acquisition in tandem with a strong remuneration package.
3. PI Insurance Fears
This has become a very real concern over the last few years. A shrinking PI market, concerns around transfer advice, ambulance chasing…the list goes on. Smaller firms in particular have been disproportionately affected, suffering larger increases in costs or finding themselves completely unable to obtain cover from insurers. In many cases, where transfer work has, or continues to take place, there may be massively inflated excesses, often over £25,000, and restrictions on the values of claims.
We don’t know what the future of the PI market looks like. We do however know that many firms are worried that even where they can obtain cover now, they could be a complaint or a thematic review away from the very real risk of not being able to get insurance in the future. Without PI, or the ability to self insure, your business is most likely to become a distressed sale, and without the ability to attain run-off cover there could be a great deal of personal liability that remains with the individuals selling.
There are firms out there blowing us away with the tools and tech they have in place to improve processes, reduce risk and add significant value to client outcomes. Whether it’s embedding ‘life planning’ into the process, working remotely from anywhere across the globe, single data entry points or a stunning CIP, never has the saying ‘if you can’t beat them join them’ resonated so much with our sellers.
There are a great number of sellers with a real passion to grow – that may sound backwards, but it’s true. There are some fabulous firms out there, with a strong board, incredible ethics and a great local reputation, but itching to do more. By seeking investment into your business, this can not only add further depth and ideas to the board, but also provide vital funding to recruit or acquire, moving your business to the next level and helping to create a substantial legacy. With client relationships that weather all storms and a marketplace providing an incredible opportunity to attract new clients, it is clear to see why more PE investors are seeking a foothold in the UK financial planning space. Matching drive and ambition with financial resources and strategy – makes this our most exciting entry in the top 6.
6. Existing succession plan no longer works
There are a number of reasons why firms are reviewing their existing succession plans. With mounting regulation, increased compliance and implementation of such changes as SMCR, many owners who previously planned to exit the business but remain as shareholders drawing a dividend are considering the appropriateness of this option. With the evident liability and risk involved within a regulated firm, unless you are working in the firm and able to clearly direct the outputs and oversee the processes of control, this strategy no longer remains compelling.
For many, recruiting good advisers was their succession plan, however good advisers don’t necessarily make good business owners. Equally your ‘succession plan’ may have no desire to take on the role as business owner and shoulder the inherent the risk involved in business ownership, nor may they have the ability to raise the required capital to support this plan.
Even where firms have family members in place as a succession plan, they are realising the importance of reviewing the opportunities in the market. These opportunities could continue to provide a rewarding career to family members, perhaps even retained ownership, but within the structure of a larger firm or group, reduced liability and financial backing.
These are just 6 of the reasons our sellers are selling. With no less than 14 different strategies available for exit, why not speak to us today to become aware of your options, formulate your ‘Why’ and start to work towards it.