What's on my mind

Don’t be duped by acquirers

13th January 2023

A few weeks ago, I met a highly successful financial planning firm owner who had decided to sell his firm to an acquirer, who approached him unsolicited with what appeared to be an outstandingly attractive offer.

After some months of negotiation, the deal fell apart when the buyer reduced the offer for what appeared to be spurious reasons, leaving the seller not only disappointed and angry but out of pocket by more than £40,000 in legal and tax fees. Additionally, his colleagues, who the buyer had asked to meet, were unsettled.

This is, unfortunately, not an uncommon outcome. In fact, it is the third such situation I have come across in as many months. So I want to address the issues that can arise and how best to avoid them.

Owners should first take a step back and really think about whether it is an appropriate time to sell, appointing experienced advisers who can act as an impartial sounding board.

If it is agreed a sale is the right option, the next step is to evaluate the offer – in particular, the buyer.

The third step is to seek alternative offers, both to become aware of what others value your business and to introduce commercial tension to secure the best terms. This is not just about the money but, perhaps more importantly, what happens to the clients, the colleagues and even the owner(s) after the sale has been completed.

The fourth step is to appoint legal and tax advisers who have recent and relevant experience. They will know what reasonable costs should be.

The fifth step is to conduct thorough due diligence on each prospective buyer. This should include seeking confirmation of the funding the buyer has in place and obtaining references from other firms that have sold to them, as well as getting to know the people they will have ongoing dealings with once the deal is complete.

The sale of a financial planning business is likely to be the largest and most important transaction the owner(s) will ever be involved in. It is therefore crucial to get right.

This article was first published on Money Marketing

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